ECONOMICS

Detailed explanation-1: -Determines the quantity of direct raw materials that must be purchased each period to meet anticipated production needs (from the production budget) and to provide for adequate levels of direct raw materials inventories.

Detailed explanation-2: -What is the Direct Materials Budget? The direct materials budget calculates the materials that must be purchased, by time period, in order to fulfill the requirements of the production budget. It is typically presented in either a monthly or quarterly format in the annual budget.

Detailed explanation-3: -Production Budget: Production Budget shows the number of units of each of the products of the company that must be produced during the Budget Period to meet the demand for the products and to keep the units of finished goods at the desired level at the end of the Budget Period.

Detailed explanation-4: -The direct materials budget illustrates how much material needs to be ordered and how much that material costs. The calculation is similar to that used in the production budget, with the addition of the cost per unit.

Detailed explanation-5: -The manufacturing overhead budget contains all manufacturing costs other than direct materials and direct labor. The information in this budget becomes part of the cost of goods sold line item in the master budget.