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: Budgeted selling price per unit $ 92 Budgeted unit sales (all on credit): July 9,000 August 11,300 September 10,400 October 10,800 Raw materials requirement per unit of output 4 pounds Raw materials cost $ 1.00 per pound Direct labor requirement per unit of output 2.8 direct labor-hours Direct labor wage rate $ 22.00 per direct labor-hour Variable selling and administrative expense $ 1.50 per unit sold Fixed selling and administrative expense $ 70,000 per month Credit sales are collected: 40% in the month of the sale 60% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The 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: Multiple Choice 57,056 pounds 44,480 pounds 43,712 pounds 70,400 pounds

Answer 1

The answer is 43,712

Step-by-step explanation:

We have:

Beginning finished good of August: 20% of budgeted sales in August = 20% x 11,300 = 2,260 units

Ending finished good of August : 20% of budgeted units required in September = 20% x 10,400 = 2,080 units

=> Units of finished goods to be produced in August = Unit sold - Beginning Inventory + Ending Inventory = 11,300 - 2,260 + 2,080 = 11,120 => Raw material for finished good in August = 4 * 11,120 = 44,480

Beginning Raw material for August = Raw material needed for August x 30% = 44,480 * 30% = 13,344

Ending Raw Material for August = Raw material needed for September x 30% = 41,920 x 30% = 12,576

=> Purchases of raw material in August = Raw material for finished good in August - Beginning Raw material for August + Ending Raw Material for August) = 44,480 - 13,344 + 12,576 = 43,712 pounds