Question

What is the accounts receivable balance at the end of July?

If 113,000 pounds of raw materials are needed to meet production in August, what is the estimated cost of raw materials purchases for July?

Answer 1

Credit sales of July = Sales units * Selling price = 26000 * 60	1560000
Accounts receivables balance at the end of July = Credit sales of July * 60% = 1560000 * 60%	936000

	Production budget
	June	July	August	September
Budgeted unit sales	9500	26000	28000	29000
(+) Desired ending inventory ( 25% of following month's unit sales )	6500	7000	7250
Total units required	16000	33000	35250
(-) Beginning inventory	2375	6500	7000
Budgeted unit production	13625	26500	28250

Note : Beginning inventory for June = Ending inventory of May = 25% * June's unit sales = 25% * 9500

2375

	Raw materials purchase budget
	June	July	August
Budgeted unit production	13625	26500	28250
(*) Raw materials required per unit (pounds)	4	4	4
Raw materials production needs (pounds)	54500	106000	113000
(+) Desired ending inventory ( 15% of following month's production needs )	15900	16950
Total raw materials needed	70400	122950
(-) Desired Beginning inventory	8175	15900
Raw materials purchases	62225	107050
(*) Cost per pound of raw materials	2.40	2.40
Estimated cost of raw materials purchase	149340	256920

Note : Beginning inventory for June = Ending inventory of May = 15% * June's raw materials production needs = 15% * 54500

8175

Estimated cost of raw materials purchase for July

256920