Question - ZZ, Inc. has budgeted sales for the next five months as follows:
Budgeted Sales in Units
January 12,000 units
February 15,000 units
March 11,000 units
April 22,000 units
May 18,000 units
ZZ, Inc. used the following information in creating its master budget for the year:
1. Ending finished goods inventory for each month should be equal to 10% of the next month's expected sales in units.
2. Ending direct materials inventory for each month should be equal to 25% of the next month's production needs.
3. Each unit produced requires 4 pounds of direct materials.
4. Direct materials are purchased for $2.75 per pound.
Calculate the dollar amount of direct materials to be purchased in January.