The Blatz Brewing Company produces 25 million hectolitres of beer each year.To put this in perspective,California consumed that much beer last year.A sales forecast for Blatz is provided in the top row of the table.Blatz sells its beer at a wholesale price of US$85 per hectoliter.Blatz buys barley,hops and yeast one month before the sale.Raw materials cost are 15% of the wholesale price of the beer.Blatz purchases its raw materials on account and pays its suppliers one month after the purchase.What are Blatz' payments to suppliers in April?
Sales and Payments Forecast
Blatz Brewing Company

Question

Quizplus · Accepted Answer

As stated in the question, raw materials cost 15% of the wholesale price of the beer. Blatz pays its suppliers one month after the purchase.
Payments to suppliers in April = Purchases in March
Purchases in March = 0.15 × April Sales
Purchases in March = 0.15 × (2 hectolitres × US$85 per hectolitre)
Purchases in March = 0.15 × $170
Purchases in March = $25.5
Payments to suppliers in April = $25.5

The Blatz Brewing Company Produces 25 Million Hectolitres of Beer