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Due to lack of space I prepared an excel spreadsheet:
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To determine the direct materials purchases budget, calculate the total needed materials for production, adjust for desired ending and beginning inventory, and then multiply by the price per pound for dough, tomato, and cheese. The September budget for dough is $27,060, for tomato is $79,145, and for cheese is $122,687.
September's Direct Materials Purchases Budget
To calculate the direct materials purchases budget for Lorenzo's Frozen Pizza Inc., we need to follow these steps for each type of pizza and each material:
Calculate the total material needed for production by multiplying the budgeted production volume by the quantity of material per unit.
Add the desired ending inventory.
Subtract the beginning inventory to find the total material to be purchased.
Multiply the total material to be purchased by the price per pound to determine the budgeted cost of purchases.
Let's work through each material:
Dough:
Total needed for 12" pizza: 15,200 units * 0.90 lbs/unit = 13,680 lbs
Total needed for 16" pizza: 26,900 units * 1.50 lbs/unit = 40,350 lbs
Total dough needed: 13,680 lbs + 40,350 lbs = 54,030 lbs
Desired ending inventory = 580 lbs
Beginning inventory = 490 lbs
Total dough purchases: 54,030 lbs + 580 lbs - 490 lbs = 54,120 lbs
Budgeted purchases of dough: 54,120 lbs * $0.50/lb = $27,060
Tomato:
Total needed for 12" pizza: 15,200 units * 0.60 lbs/unit = 9,120 lbs
Total needed for 16" pizza: 26,900 units * 1.00 lbs/unit = 26,900 lbs
Total tomato needed: 9,120 lbs + 26,900 lbs = 36,020 lbs
Desired ending inventory = 185 lbs
Beginning inventory = 230 lbs
Total tomato purchases: 36,020 lbs + 185 lbs - 230 lbs = 35,975 lbs
Budgeted purchases of tomato: 35,975 lbs * $2.20/lb = $79,145
Cheese:
Total needed for 12" pizza: 15,200 units * 0.80 lbs/unit = 12,160 lbs
Total needed for 16" pizza: 26,900 units * 1.30 lbs/unit = 34,970 lbs
Total cheese needed: 12,160 lbs + 34,970 lbs = 47,130 lbs
Desired ending inventory = 340 lbs
Beginning inventory = 275 lbs
Total cheese purchases: 47,130 lbs + 340 lbs - 275 lbs = 47,195 lbs
Budgeted purchases of cheese: 47,195 lbs * $2.60/lb = $122,687
Therefore, the September direct materials purchases budget for dough is $27,060, for tomato is $79,145, and for cheese is $122,687.
