Selva Inc. makes keyboards for tablets, and packages them in crates containing 50 keyboards per crate. Planned production in units for the first three months of the coming year is:
January .................... 43,800
February ...................41,000
March ......................50,250
Each keyboard requires two litres of chemicals and one plastic crate. Company policy requires that ending inventories of raw materials for each month be 15 percent of the next month's production needs. That policy was met for the ending inventory of December in the prior year. The cost of one litre of chemicals is $0.50. The cost of one crate is $1.60.
Required:
1. Calculate the ending inventory of chemicals in litres for December of the prior year, and for January and February. What is the beginning inventory of chemicals for January?
2. Prepare a direct materials purchases budget for chemicals for the months of January and February.
3. Calculate the ending inventory of crates for December of the prior year, and for January and February. What is the beginning inventory of crates for January?
4. Prepare a direct materials purchases budget for crates for the months of January and February.