Hesterman Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected:
40% in the month of the sale
60% in the following month
The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month's raw materials production needs.
If 39,720 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

Question

Hesterman Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations:   Credit sales are collected:
40% in the month of the sale
60% in the following month
The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month's raw materials production needs.
If 39,720 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

Quizplus · Accepted Answer

The budgeted required production for May is computed as follows:
 11eacbfc_c5de_c789_8ffe_430c9a1f6cff_TB7552_00 *June sales of 14,000 units × 40% = 5,600 units
** May sales of 9,400 units × 40%= 3,760 units
The budgeted raw material purchases for May are computed as follows:
 11eacbfc_c5de_ee9a_8ffe_6b58d62d1430_TB7552_00 * 39,720 pounds × 20% = 7,944 pounds.
** 33,720 pounds × 20% = 6,744 pounds.
The budgeted cost of raw material purchases for May is computed as follows:
 11eacbfc_c5de_ee9b_8ffe_7120acdef46d_TB7552_00

Hesterman Corporation Makes One Product and Has Provided the Following