Bentsen Corporation makes one product. The ending finished goods inventory equals 40% of the following month's sales. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $2.00 per pound. If 76,680 pounds of raw materials are required for production in September, then the budgeted cost of raw material purchases for August is closest to:

Question

Bentsen Corporation makes one product.  The ending finished goods inventory equals 40% of the following month's sales. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $2.00 per pound. If 76,680 pounds of raw materials are required for production in September, then the budgeted cost of raw material purchases for August is closest to:

Quizplus · Accepted Answer

The budgeted required production for August is computed as follows:
 11eacbfc_c5d3_f1ca_8ffe_fb341eeb62b2_TB7552_00 *September sales of 13,900 units × 40% = 5,560 units
** August sales of 9,000 units × 40% = 3,600 units
The budgeted raw material purchases for August are computed as follows:
 11eacbfc_c5d4_18db_8ffe_35f3d1311f3d_TB7552_00 * 76,680 pounds × 10% = 7,668 pounds.
** 65,760 pounds × 10% = 6,576 pounds.
The budgeted cost of raw material purchases for August is computed as follows:
 11eacbfc_c5d4_18dc_8ffe_53e8d3f7babf_TB7552_00

Bentsen Corporation Makes One Product