Materials Requirements and Purchases Budget. The Budget Department of the Mifer-Jifson Manufacturing Company prepares an annual production and materials requirement budget in which the first quarter of the year is on a monthly basis and the balance of the year in totals by quarters. In the third month of a quarter, detailed budgets are again prepared for the next quarter.
The company produces two products, Miff and Jiff, which require three raw materials, XLO, YO, and ZMO, in the following quantities (kilograms):
Materials Requirement and Costs
Product
Miff ……••.•..
Cost …..
Jiff ………•..•
XLO
1 kg.
$1.50 per kg
1 kg.
YO
2.Y2 kg.
$1 per kg.
2 kg.
ZMO
IY2 kg.
$2 per kg.
.Y2 kg.
Production schedule:
First Quarter
Remaining Three Quarters
Product
January
F – e b – r u – ary
March
2d
3d
4th
Miff ……
3,000
3,500
3,800
10,000
11,000
12,000
Jiff …••.•
5,000
5,500
6,000
17,000
18,000
18,000
At the beginning of the budget year, raw materials inventories are expected to have reached the following levels: XLO – 6,000 kg.; YO – 14,000 kg.; ZMO – 8,000 kg. The ending raw materials inventories should be about 10% higher than the consumption of the last month of the year. For budget purposes the last month's production is considered to be one third of that of the quarter's.
Required: (1) A materials requirement budget showing: type and quantity of raw materials required per product, units (kilograms) of raw materials re- quired, and a summary of the materials required per product.
(2) A purchases budget (on an annual basis – not broken down into the first three months and the remaining three quarters) showing: quantity re- quired for production, ending inventories, beginning inventories, purchases, and cost of purchases.