From the course: Accounting Foundations: Budgeting

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Master budget exercise: The direct materials budget

Master budget exercise: The direct materials budget

From the course: Accounting Foundations: Budgeting

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Master budget exercise: The direct materials budget

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- All right, the next detailed budget to be prepared is the direct materials budget. Based on engineering department's estimates of the materials required to make a boat, this budget helps management schedule purchases from suppliers. Brigham's engineers estimate that the standard amount of wood needed per boat is 100 board feet. Now note, this number has been chosen in this example for ease in calculations. I'm actually not sure you can actually make a 15 foot fishing boat out of 100 board feet. Brigham's purchasing agent has been able to purchase wood at $10 per board foot. The purchasing agent expects that this price will continue to be available through 2019. Now, that assumption just makes this example simpler. It certainly doesn't have to be that way. Expected changes in materials prices should definitely be included in the budget calculations. Now, based on these requirements for materials, the direct materials budgets for Brigham Boat Company for the first quarter of 2019 for…

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