Fuqua company's sales budget projects unit sales of part 198z of 10,000 units in january, 12,000 units in february, and 13,000 units in march. each unit of part 198z requires 4 pounds of materials, which cost $2 per pound. fuqua company desires its ending raw materials inventory to equal 40% of the next month's production requirements, and its ending finished goods inventory to equal 20% of the next month's expected unit sales. these goals were met at december 31, 2016.
the production budget for january and february 2017 follow:
fuqua company
production budget
for the two months ending february 28, 2017
january february
expected units sales 10,000 12,000
add: desired ending finished goods inventory 2,400 2,600
total required units 12,400 14,600
less: beginning finished goods inventory 2,000 2,400
required production units 10,400 12,200
prepare a direct materials budget for january 2017.

fuqua company
direct materials budget
for the month ending january 31, 2017
january
units to be produced 10,400
direct material pounds per unit 4
total pounds needed for production 41,600
add: desired pounds in ending materials inventory
total materials required
less: beginning direct materials
direct materials purchases
cost per pound $2
total cost of direct materials purchased
direct materials budget:
budgets are used by companies for planning purposes and for comparison purposes after to see how their expectations compare to what they actually spent. a direct materials budget is used to predict how much direct materials will need to be purchased and what the predicted cost will be.