Luchini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:The budgeted selling price per unit is $111. Budgeted unit sales for April, May, June, and July are 7,100, 10,100, 13,300, and 14,000 units, respectively. All sales are on credit.Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month.The ending finished goods inventory equals 10% 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 5 pounds of raw materials. The raw materials cost $5.00 per pound.Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.The direct labor wage rate is $18.00 per hour. Each unit of finished goods requires 2.9 direct labor-hours.Variable manufacturing overhead is $7.00 per direct labor-hour. Fixed manufacturing overhead is zero.The budgeted accounts receivable balance at the end of May is closest to:

Question

Quizplus · Accepted Answer

First, we need to calculate the total sales revenue for each month:
April: 7,100 units x $111 per unit = $788,100
May: 10,100 units x $111 per unit = $1,121,100
June: 13,300 units x $111 per unit = $1,476,300
July: 14,000 units x $111 per unit = $1,554,000

Next, we need to calculate the collections for each month's credit sales:
April: 40% x $788,100 = $315,240
May: (60% x $788,100) + (40% x $1,121,100) = $472,860
June: (60% x $1,121,100) + (40% x $1,476,300) = $1,059,160
July: (60% x $1,476,300) + (40% x $1,554,000) = $1,421,880

The budgeted accounts receivable balance at the end of May is the total accounts receivable at the end of May, which is the sum of April's collections and May's collections minus May's sales revenue:
($315,240 + $472,860) - $1,121,100 = $667,000

However, we need to remember that not all of May's sales revenue will be collected in May, so we need to adjust for May's collections for sales made in April as well:
($315,240 + ($472,860 x 0.4) + ($1,121,100 x 0.6)) - $1,121,100 = $672,660

Therefore, the closest answer is C) $672,660.

Luchini Corporation Makes One Product and It Provided the Following