Question

Michard Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: The budgeted selling price per unit is $125. Budgeted unit sales for April, May, June, and July are 7,600, 10,500, 13,800, and 12,900 units, respectively. All sales are on credit. Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month. The ending finished goods inventory equals 20% of the following month's sales. The ending raw materials inventory equals 30% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.00 per pound. Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month. The direct labor wage rate is $25.00 per hour. Each unit of finished goods requires 3.0 direct labor-hours. The variable selling and administrative expense per unit sold is $3.40. The fixed selling and administrative expense per month is $80,000. If 54,480 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

Answer 1

PRODUCTION BUDGET
			APRIL	MAY	JUNE	QUARTER	JULY
Budgeted Sales Units			7,600	10,500	13,800	31,900	12,900
Add: Desired Ending Finished inventory			2,100	2,760	2,580	2,580
Total Needs			9,700	13,260	16,380	34,480
Less: Beginning Finished Inventory			1,520	2,100	2,760	1,520
Required Production in units			8,180	11,160	13,620	32,960
Raw material Purchase for May:
Total Production units for May				11160
Raw material required per unit				4
Total Production needs				44640
Add: Desired Ending raw material				16344
(54480* 30%)
Total Needs				60984
Less: Desired Beginning Raw material				13392
(44640*30%)
Total Raw material Purchase in units				47592
Raw material price per unit				2
Budgeted Raw material purchases In $				95184