Sevenbergen 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
Raw materials purchases are paid:
30% in the month of purchase
70% in the following month
The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs.
If 41,920 pounds of raw materials are required for production in September, then the budgeted cost of raw material purchases for August is closest to:

Question

Sevenbergen 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
Raw materials purchases are paid:
30% in the month of purchase
70% in the following month
The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs.
If 41,920 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_c5e4_45f1_8ffe_73613770b353_TB7552_00 *September sales of 10,400 units × 20% = 2,080 units
**August sales of 11,300 units × 20%= 2,260 units
The budgeted raw material purchases for August are computed as follows:
 11eacbfc_c5e4_45f2_8ffe_9de743f90b0b_TB7552_00 * 41,920 pounds × 30% = 12,576 pounds
**44,480 pounds × 30% = 13,344 pounds.
The budgeted cost of raw material purchases for August is computed as follows:
 11eacbfc_c5e4_9413_8ffe_51cf99b02623_TB7552_00

Sevenbergen Corporation Makes One Product and Has Provided the Following