Sevenbergen 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 sale60% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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.The budgeted required production for August is closest to:

A) 15,640 units
B) 13,380 units
C) 11,300 units
D) 11,120 units

To determine the required production for August, we need to first calculate the budgeted sales for September (since the ending finished goods inventory should equal 20% of the following month's sales).

Let's assume that the company sells X units in August. Then, the budgeted sales for September would be:

September Sales = X * 1.2

Assuming that credit sales are collected 40% in the month of the sale and 60% in the following month, the budgeted cash collections for September would be:

Cash Collections for September = (0.4 * August Sales) + (0.6 * September Sales)

Next, we need to calculate the budgeted raw materials production needs for September (since the ending raw materials inventory should equal 30% of the following month's needs).

Assuming that the company uses Y units of raw materials to produce X units of finished goods, the budgeted raw materials production needs for September would be:

September Raw Materials Production Needs = Y * (1.2 * X) + 0.3 * September Raw Materials Production Needs

Simplifying this equation, we get:

0.7 * September Raw Materials Production Needs = 1.2 * Y * X

September Raw Materials Production Needs = (1.2 * Y * X) / 0.7

Finally, we can calculate the budgeted production for August by taking into account the desired ending finished goods inventory and the expected sales for August:

August Production = X + 0.2 * (1.2 * X) - Ending Finished Goods Inventory

where Ending Finished Goods Inventory = Budgeted Sales for September * 0.2

Substituting the values we calculated earlier, we get:

August Production = X + 0.24X - (0.12 * 1.2 * X)

Simplifying this equation, we get:

August Production = X * (1 + 0.24 - 0.144)

August Production = X * 1.096

Therefore, the budgeted required production for August is closest to:

August Production = X = Budgeted Sales for August / 1.096

Assuming that the budgeted sales for August are 12,000 units, we get:

August Production = 12,000 / 1.096 = 10,936 units

Since the answer choices are not exact, the closest answer is D) 11,120 units.