Sleeter Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:Budgeted unit sales for April, May, June, and July are 7,500, 11,900, 10,800, and 14,800 units, respectively. All sales are on credit.The ending finished goods inventory equals 30% of the following month's sales.The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $5.00 per pound.If 72,000 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

Question

Quizplus · Accepted Answer

To calculate the ending raw materials inventory, we need to first calculate the total raw materials needed for production for each month:

April: 7,500 units x 6 pounds per unit = 45,000 pounds
May: 11,900 units x 6 pounds per unit = 71,400 pounds
June: 10,800 units x 6 pounds per unit = 64,800 pounds
July: 14,800 units x 6 pounds per unit = 88,800 pounds

Then, we need to multiply each month's total raw materials needed by 30% to find the ending raw materials inventory for the previous month:

March (for April): 45,000 x 0.3 = 13,500 pounds
April (for May): 71,400 x 0.3 = 21,420 pounds
May (for June): 64,800 x 0.3 = 19,440 pounds
June (for July): 88,800 x 0.3 = 26,640 pounds

To find the budgeted raw materials purchases for May, we need to subtract the May raw materials inventory from the June raw materials production needs:

Raw materials needed for production in June: 72,000 pounds
Raw materials inventory at the end of May: 21,420 pounds
Raw materials purchases for May: 72,000 - 21,420 = 50,580 pounds

The cost of raw materials is $5.00 per pound, so the budgeted cost of raw material purchases for May is:

$5.00 per pound x 50,580 pounds = $252,900

However, we need to remember that we're looking for the closest answer choice. The closest answer choice to $252,900 is $350,970, which is answer choice C.

Sleeter Corporation Makes One Product and It Provided the Following