When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased.

Direct Materials Budget

An estimation of the quantity and cost of direct materials necessary for production, matching the production budget.

Beginning Inventory

The value of goods available for sale at the start of an accounting period.

Production Needs

The requirements necessary to manufacture products, including materials, labor, and machinery.