Mighty Tow manufactures trailer hitches for personal vehicles. The company has production levels budgeted for this period of 2,000 hitches. Each hitch requires 7.5 feet of steel to manufacture.
The company has a policy of always having 250 feet of steel on hand at the end of the period, in case of excess demand. Last period orders were higher than expected, so the company ended the period with only 200 feet of steel on hand. Steel costs $10/foot, and Mighty Tow has an agreement to pay their supplier 75% of the cost of purchases in the month bought, and the remainder in the month following.
The Accounts Payable balance at the beginning of the period is $15,000.
What is the budgeted amount of cash to be paid for raw materials this month?

Question

Mighty Tow manufactures trailer hitches for personal vehicles. The company has production levels budgeted for this period of 2,000 hitches. Each hitch requires 7.5 feet of steel to manufacture. 
The company has a policy of always having 250 feet of steel on hand at the end of the period, in case of excess demand. Last period orders were higher than expected, so the company ended the period with only 200 feet of steel on hand. Steel costs $10/foot, and Mighty Tow has an agreement to pay their supplier 75% of the cost of purchases in the month bought, and the remainder in the month following.
The Accounts Payable balance at the beginning of the period is $15,000.
What is the budgeted amount of cash to be paid for raw materials this month?

Quizplus · Accepted Answer

The Answer of Mighty Tow manufactures trailer hitches for personal vehicles. The company has production levels budgeted for this period of 2,000 hitches. Each hitch requires 7.5 feet of steel to manufacture. 
The company has a policy of always having 250 feet of steel on hand at the end of the period, in case of excess demand. Last period orders were higher than expected, so the company ended the period with only 200 feet of steel on hand. Steel costs $10/foot, and Mighty Tow has an agreement to pay their supplier 75% of the cost of purchases in the month bought, and the remainder in the month following.
The Accounts Payable balance at the beginning of the period is $15,000.
What is the budgeted amount of cash to be paid for raw materials this month?

Mighty Tow Manufactures Trailer Hitches for Personal Vehicles