Hesterman 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 sale
60% in the following month
The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month's raw materials production needs.
-If 39,720 pounds of raw materials are required for production in June,then the budgeted cost of raw material purchases for May is closest to:

Question

Hesterman 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 sale
60% in the following month
The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month's raw materials production needs.
-If 39,720 pounds of raw materials are required for production in June,then the budgeted cost of raw material purchases for May is closest to:

Quizplus · Accepted Answer

The budgeted required production for May is computed as follows:
 11ea7761_17b0_ff6d_81a5_1f7b70a1914c_TB2580_00 *June sales of 14,000 units × 40% = 5,600 units
** May sales of 9,400 units × 40%= 3,760 units
The budgeted raw material purchases for May are computed as follows:
 11ea7761_17b0_ff6e_81a5_53bb87e43199_TB2580_00 * 39,720 pounds × 20% = 7,944 pounds.
** 33,720 pounds × 20% = 6,744 pounds.
The budgeted cost of raw material purchases for May is computed as follows:
 11ea7761_17b0_ff6f_81a5_a36aaa20bcaf_TB2580_00

Hesterman Corporation Makes One Product and Has Provided the Following