Explanation Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities. Production Budget shows the quantities of units that a company must produce to meet the budgeted sales and inventory. The following table shows the November’s direct materials purchases budget. Incorporation L Direct Materials Purchases Budget For The Month Ending November 30 Particulars Dough Tomato Cheese Units Required For Production 12” Pizza 38,500(1) 17,500 (2) 49,000 (3) 16” Pizza 40,000(4) 20,000 (5) 60,000 (6) Add: Desired Inventory, November 30 2,000 1,200 2,800 Total units Required 80,500 38,700 111,800 Less: Estimated Inventory, November 1 (2,500) (1,000) (3,000) Total Pounds To Be Purchased (A) 78,000 37,700 108,800 Unit Price Per Pound (B) $0.50 $0.60 $0.85 Total (A) × (B) $39,000 $22,620 $92,480 Total Direct Materials To Be Purchased $154,100 Table (1) Working Notes (1): Calculate the direct material (dough) for 12” pizza. Direct material (dough) cost for 12" pizza = 70 , 000 × 0.55 lb . = 38 , 500 Working Notes (2): Calculate the direct material (tomato) for 12” pizza. Direct material (tomato) cost for 12" pizza = 70 , 000 × 0

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Author: Carl Warren, Ph.d. Cma William B. Tayler

Publisher: South-Western College Pub

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Prepare the November’s direct materials purchases budget for Incorporation TFP.

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