Anticipated sales for Goodstone Tire Company were 38,000 passenger car tires and 14,000 truck tires. There were no anticipated beginning finished goods inventories for either product. The planned ending finished goods inventories were 2,750 units for each product. Rubber and steel belts are used in producing passenger car and truck tires according to the following table:
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Rubber |
30 lbs. per unit |
65 lbs. per unit |
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Steel belts |
4 lbs. per unit |
9 lbs. per unit |
The purchase prices of rubber and steel are $2.90 and $3.50 per pound, respectively. The desired ending inventories of rubber and steel belts are 45,000 and 9,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 72,000 and 6,000 pounds, respectively.
The following direct materials purchases budget was prepared for Goodstone Tire Company:
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Goodstone Tire Company |
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Direct Materials Purchases Budget |
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For the Year Ending December 31, 2008 |
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Rubber |
Steel Belts |
Total |
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Units required for production: |
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Passenger tires |
1,140,0001 lbs. |
152,0003 lbs. |
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Truck tires |
910,0002 |
126,0004 |
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Total |
2,050,000 lbs. |
278,000 lbs. |
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Unit price |
_ $2.90 |
_ $3.50 |
$6,918,000 |
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Total direct materials purchases |
$5,945,000 |
$973,000 |
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1. 38,000 tires × 30 lbs. = 1,140,000 lbs. |
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2. 14,000 tires ×65 lbs. = 910,000 lbs. |
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3. 38,000 tires × 4 lbs. = 152,000 lbs. |
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4. 14,000 tires ×9 lbs. = 126,000 lbs. |
Correct the direct materials purchases budget for Goodstone Tire Company.