Turbo Manufacturing plans to produce 20,000 units, 24,000 units, and 30,000 units, respectively, in

October,

November, and December. Each of these units requires four units of part no. 879, which the company
can

purchase for $7 each. Turbo has 35,000 units of part no. 879 in stock on September 30.

Required:

Prepare a direct-material purchases budget for October and November if management desires to
maintain an

ending raw-material inventory equal to 40% of the following month's production usage.

LO: 4 Type: A

Answer:

October November

Planned production 20,000 24,000

Units of part no. 879 x 4 x 4

Units of part no. 879 used in production 80,000 96,000

Add: Desired ending inventory* 38,400 48,000

Total units of part no. 879 needed 118,400 144,000

Less: Beginning inventory of part no. 879 35,000 38,400

Units of part no. 879 to be purchased 83,400 105,600

Cost per unit x $7 x $7

Cost of direct material purchases

*October: 24,000 x 4 x 40%; November: 30,000 x 4 x

40%

$583,800 $739,20