Direct Materials Purchases Budget

After the Direct Materials Usage Budget is complete, the Purchasing Department can prepare the Direct Materials Purchases budget. As is done in the Production Budget for finished goods, the quantities of direct materials to be used in production are adjusted by the amount of change from beginning to ending materials inventories to determine the quantity of each material to be purchased. Then the costs for those purchases are calculated using the budgeted costs per unit of direct materials.

The Direct Materials Purchases Budget will also be affected by production needs created by any new capital projects planned to begin production during the year. Those should be incorporated in the Sales Budget and the Production Budget.