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 sale60% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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.The budgeted sales 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 sale60% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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.The budgeted sales for August is closest to:

Quizplus · Accepted Answer

To determine the budgeted sales for August, we need to first determine the total sales for August and September. 
Total sales for August: 
August credit sales = $800,000 
September collections = $480,000 (60% of $800,000) 
Total August sales = $1,280,000

Total sales for September: 
September credit sales = $960,000 
October collections = $576,000 (60% of $960,000) 
Total September sales = $1,536,000

To determine the budgeted sales for August, we can take the average of the two months: 
($1,280,000 + $1,536,000) / 2 = $1,408,000 / 2 = $704,000

Therefore, the budgeted sales for August is closest to $1,039,600 (choice B).

Sevenbergen Corporation Makes One Product and Has Provided the Following