Question

Exercise 10.41 New Ventures intends to start business on January 1. Production plans for the first four months of operations are as follows: January 23,000 units February 54,000 units March 90,000 units April 90,000 units Each unit requires 4 kilograms of material. The firm would like to end each month with enough raw material Inventory on hand to cover 25% of the following month's production needs. The material costs $8 per kilogram Management anticipates being able to pay for 40% of the purchases in the month of purchase. The firm will receive a 11% discount for these early payments. Management anticipates having to defer payment to the next month on 60% of the firm's purchases. No discount will be taken on these late payments. The business starts with no inventories on January 1. Determine the budgeted payments for purchases of materials for each of the first three months of operations. (Round answers to the nearest whole dollar , e.g. 5,275.) JanuaryFebruary March Payments for purchases of materials $

Answer 1

f

	Jan	Feb	Mar
Payments for purchase of materials	415808	1572288	2750400

Workings

	Jan	Feb	Mar	Apr
	1	2	3	4
Production (UNITS)	23000	54000	90000	90000
Materials required per unit	4	4	4	4
Materials required to cover that month's production	92000	216000	360000	360000
25% of next months requirements	54000	90000	90000
Total materials required	146000	306000	450000	360000
Material cost per unit	8	8	8
Total Material cost	1168000	2448000	3600000
	40%
	60%
40% of that month's (After discount)	415808	871488	1281600
60% of previous month		700800	1468800
Payments for purchase of materails	415808	1572288	2750400
	Jan	Feb	Mar
Payments for purchase of materails	415808	1572288	2750400