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Direct material purchases and budgeted payments Campbell Manufacturing intends to start business on January 1. Production plans for...

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Accounting

Direct material purchases and budgetedpayments
Campbell Manufacturing intends to start business on January 1.Production plans for the first four months of operations are asfollows:

January8,000units
February20,000units
March28,000units
April28,000units

Each unit requires two pounds of material. The firm would liketo end each month with enough raw material to cover 25 percent ofthe following month’s production needs. Raw material costs $7 perpound. Management pays for 40 percent of purchases in the month ofpurchase and receives a 10 percent discount for these payments. Theremaining purchases are paid in the following month, with nodiscount available.
a. Prepare a purchases budget for the first quarter of theyear in units, in total, and in dollars.
Note: Do not use a negative sign with youranswers.

JanuaryFebruaryMarchQuarter
Units produced
Pounds per unitx 2x 2x 2x 2
Pounds needed
EI in pounds
Total required
Less BI
Pounds to purchase
Cost per poundx $7x $7x $7x $7
Total cost of RM

b. Determine the budgeted payments for purchases of rawmaterial for each of the first three months of operations and forthe quarter in total.

Payments
JanuaryFebruaryMarchQuarter
January purchases
February purchases
March purchases
Total

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