Yandell expects to produce 1 comma 950 units in January and 2 comma 110 units in February . The company budgets 5 pounds per unit of direct materials at a cost of $ 50 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 5 comma 100 pounds. Yandell desires the ending balance in Raw Materials Inventory to be 80 % of the next month's direct materials needed for production. Desired ending balance for February is 4 comma 700 pounds. Prepare Yandell 's direct materials budget for January and February .

                                                          January                     February

Budgeted Material Cost                   $65,450                     $340,500

Explanation:

Direct materials budget for January and February .

                                                              January                     February

Production                                            1,950 units                2,110 units

Production Material needs (pounds)   9,750                        10,550

Add Budgeted Closing Materials        8,440                          4,700

Total Materials needed                        18,190                        15,250

Less Budgeted Opening Materials     (5,100)                        (8,440)

Budgeted Materials                             13,090                         6,810

Cost per material = $ 50 per pound

Budgeted Material Cost                   $65,450                     $340,500

14.95%

Explanation:

First we will determine the market risk premium which shall be calculated as follows:

Market risk premium=Expected annual return of market-Risk free return

In the given question

Expected annual return of market=13%

Risk free return=Return on T-Bonds=6.5%

Market risk premium=13%-6.5%=6.5%

Based on above Market risk premium, the firm required return shall be calculated as follows:

Firm required return=Risk free return+Beta*Market risk premium

                                   =6.5%+1.30*6.5%

                                   =14.95%