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.If 41,920 pounds of raw materials are required for production in September, then the budgeted 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 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.If 41,920 pounds of raw materials are required for production in September, then the budgeted raw material purchases for August is closest to:

Quizplus · Accepted Answer

To calculate the budgeted raw material purchases for August, we need to first calculate the raw materials production needs for August. Since the raw materials purchases are paid 30% in the month of purchase and 70% in the following month, the budgeted raw material purchases for August will depend on the raw materials needed in September.

From the information given, we know that 41,920 pounds of raw materials are required for production in September. To determine the raw materials production needs in August, we need to add the ending raw materials inventory for August (which should equal 30% of the following month's raw materials production needs) to the raw materials required for production in September:

Raw materials production needs in August = 41,920 pounds / (1 + 30%) = 32,246 pounds
Ending raw materials inventory for August = 30% x 41,920 pounds = 12,576 pounds

Therefore, the budgeted raw material purchases for August would be:

Budgeted raw material purchases for August = Raw materials production needs in August + Ending raw materials inventory for August
Budgeted raw material purchases for August = 32,246 pounds + 12,576 pounds = 43,722 pounds

The closest answer to 43,722 pounds is C) 43,712 pounds.

Sevenbergen Corporation Makes One Product and Has Provided the Following