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Delray Manufacturing needs to better budget and analyze costs. While Delray has experienced high sales growth, it has struggled to effectively manage costs and inventories. Delray aims to end each month with direct materials inventory equal to 40% of next month’s production needs. Each finished unit requires 4 pounds of direct materials and 2 hours of direct labor. Delray budgets $12,000 of fixed overhead costs per month. A Tableau Dashboard is provided to aid our analysis.

Answer :

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Answer  and Explanation:

1.

Direct Material budget  

April May June

Budgeted Production (Units) 880 1100 1075

Material required per unit (Pounds)4 4 4

Materials needed for production 3520 4400 4300

Add : Desired Ending Inventory 1760 1720 1800

Total Material Requirements (Pounds) 5280 6120 6100

Less : Beginning Inventory 1408 1760 1720

Materials to be purchased (pounds) 3872 4360 4380

Material price per pound $ 3 $ 3 $  3

Budgeted Cost of direct material purchases $     11,616 $        13,080 $       13,140

Ending Inventory is 40% of next month production needs

Ending inventory for June can be analysed from chart given above which shows 1800, therefore production for July is = 1800/40% = 4500 units

Beginning Inventory is taken as 40% of current months

2.

Direct Material budget  

April May June

Budgeted Production (Units) 880 1100 1075

Material required per unit (Pounds) 4 4 4

Materials needed for production 3520 4400 4300

Add : Desired Ending Inventory 1540 1505 1575

Total Material Requirements (Pounds) 5060 5905 5875

Less : Beginning Inventory 1408 1540 1505

Materials to be purchased (pounds) 3652 4365 4370

Material price per pound $  3 $   3 $  3

Budgeted Cost of direct material purchases $     10,956 $        13,095 $    13,110

Budgeted cost for april will therefore down, as less material is required and needed to be purchased.

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