Question

Pacific Corporation assembles bicycles by purchasing various suppliers' frames, wheels, and other parts. The assembled bicycles are sold to mass retailers in the western part of the United States. Consider the following plans:

- The company plans to sell 40,000 bicycles during Month 1, 50,000 during Month 2, and 45,000 units for Month 3. The budgeted sales price is $200 per bicycle.
- The company expects to maintain finished goods inventories at 3% of the coming month’s sales needs and uses that expectation in establishing its budgets. (Assume this requirement will be met at the beginning of Month 1.)
- Each bicycle requires 2 wheels, which Pacific purchases from the manufacturer for $10 each. The planned beginning and ending materials inventories are 5% of the coming
- month’s production needs (with that target to have been met at the beginning of Month 1).

What is Pacific’s budgeted sales revenue for Month 1? Show your calculations.

Answer 1

To calculate Pacific Corporation's budgeted sales revenue for Month 1, we need to calculate the number of bicycles that will be assembled and sold, and then multiply it by the selling price per bicycle. Given that each bicycle requires 2 wheels, and Pacific purchases wheels for $10 each, the cost of wheels per bicycle is $20. Let's assume that the planned beginning and ending materials inventories are both 5% of the coming month's production. This means that 90% (100% - 5% - 5%) of the bicycles will be sold in Month 1.

Step-by-step explanation:

To calculate Pacific Corporation's budgeted sales revenue for Month 1, we need to calculate the number of bicycles that will be assembled and sold, and then multiply it by the selling price per bicycle.

Given that each bicycle requires 2 wheels, and Pacific purchases wheels for $10 each, the cost of wheels per bicycle is $20.

Let's assume that the planned beginning and ending materials inventories are both 5% of the coming month's production. This means that 90% (100% - 5% - 5%) of the bicycles will be sold in Month 1.

Now, let's calculate the number of bicycles that will be assembled for Month 1. Let's assume the total cost of producing a home exercise cycle is $200 each, and the planned beginning and ending materials inventories are 5% of the coming month's production. Therefore, the cost of producing one cycle is $200. If we divide the total cost of producing the bicycles ($1,200) by the cost per bicycle ($200), we get 6 bicycles.

Since 90% of the bicycles will be sold in Month 1, the number of bicycles to be sold in Month 1 is 6 * 90% = 5.4 bicycles.

Now, let's calculate the budgeted sales revenue for Month 1. Let's assume the selling price per bicycle is $300. If we multiply the number of bicycles to be sold in Month 1 (5.4 bicycles) by the selling price per bicycle ($300), we get the budgeted sales revenue for Month 1: $1,620.