Asked by Emily Keith on Jun 06, 2024
Verified
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.If 41,920 pounds of raw materials are required for production in September, then the budgeted raw material purchases for August is closest to:
A) 57,056 pounds
B) 44,480 pounds
C) 43,712 pounds
D) 70,400 pounds
Raw Material Purchases
The cost associated with acquiring raw materials needed for production.
Credit Sales
Credit sales are transactions where the customer purchases goods or services on account, paying at a future date rather than at the time of purchase.
Finished Goods Inventory
The stock of completed products ready for sale but not yet sold at the end of an accounting period.
- Design financial estimates for sales projections, production scheduling, direct material acquisitions, and labor remunerations.
Verified Answer
From the information given, we know that 41,920 pounds of raw materials are required for production in September. To determine the raw materials production needs in August, we need to add the ending raw materials inventory for August (which should equal 30% of the following month's raw materials production needs) to the raw materials required for production in September:
Raw materials production needs in August = 41,920 pounds / (1 + 30%) = 32,246 pounds
Ending raw materials inventory for August = 30% x 41,920 pounds = 12,576 pounds
Therefore, the budgeted raw material purchases for August would be:
Budgeted raw material purchases for August = Raw materials production needs in August + Ending raw materials inventory for August
Budgeted raw material purchases for August = 32,246 pounds + 12,576 pounds = 43,722 pounds
The closest answer to 43,722 pounds is C) 43,712 pounds.
Learning Objectives
- Design financial estimates for sales projections, production scheduling, direct material acquisitions, and labor remunerations.
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