Question 5

Use the information below to answer the following questions:

Piper Pasta produces pasta. Piper has a policy that its ending inventory of pasta should be 20% of the next month's expected demand. At March 31, Piper has 120 batches of prepared pasta in finished goods inventory.

The pasta that piper produces uses a special organic flour which costs $2.40 per kilogram. Each batch of pasta that Piper makes requires 5 kilograms of flour. At March 31 Piper had 900 kilograms of flour in inventory and has a policy that ending raw materials inventory should always be 30% of the next months need.

Each batch of pasta requires 3 direct labour hours at a cost of $ 32.00.Manufacturing overhead is applied at the rate of $25.00 per direct labour hour.

The demand schedule for the next four months is as follows:

Month Budgeted Demand (Batches)

April 600

May 750

June 800

July 700

August 600

1) Prepare a Direct Materials Budget for the second quarter by month and for the quarter in total to determine the amount of flour Piper will need to purchase each month and the total cost of the flour.

2) Prepare a Direct Labour Budget for the second quarter by month and for the quarter in total.