Question

Sleeter Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:
a. Budgeted unit sales for April, May, June, and July are 7,500, 11,900, 10,800, and 14,800 units, respectively. All sales are on credit.

b. The ending finished goods inventory equals 30% of the following month's sales.

c. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $5.00 per pound.

If 72,000 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

A) $347,100

B) $350,970

C) $455,100

D) $559,230

Answer 1

Answer:

C) $455,100

Explanation:

The budgeted finished goods inventory for May is equal to 70% of May budgeted sales and 30% of June budgeted sales:

$FG = 0.7*11,900+0.3*10,800=11,570\ units$

The budgeted raw materials (in pounds) for May is given by 30% of the June raw materials requirement added to the amount require to produce 11,570 units:

$RM = 0.30*72,000+6*11,570\\RM= 91,020\ pounds$

At $5 per pound, the cost of raw material purchases for May is:

$C=91,020*\ 5=\ 455,100$