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.If 66,850 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

Question

Quizplus · Accepted Answer

The budgeted raw material purchases for May are calculated based on June's production needs. Since 66,850 pounds are required for June and the ending raw materials inventory for May needs to be 30% of June's raw materials production needs, we calculate May's ending inventory as 0.30 * 66,850 = 20,055 pounds. To meet June's production needs and maintain the ending inventory, May's total raw material needs are 66,850 (for June production) + 20,055 (ending inventory for May) = 86,905 pounds. If we assume May starts with the required ending inventory of April as its beginning inventory, which is also 30% of May's production needs, we need to subtract this amount to find the net purchases for May. Since the problem doesn't provide April's production needs directly, we can't calculate April's ending/May's beginning inventory precisely. However, the question asks for the budgeted raw material purchases for May, which we've calculated as the total material needs for June's production plus May's ending inventory requirement. Without the exact beginning inventory for May, the closest answer based on the information provided and the calculation for total needs is D) 56,525 pounds, acknowledging an error in the calculation process as the precise beginning inventory for May is not factored due to missing information. The correct approach involves adjusting for the beginning inventory, but with given data, a precise calculation aligning with the options cannot be completed accurately.

Luchini Corporation Makes One Product and It Provided the Following