Question

# ABC Company makes and sells a single product. It requires 4 pounds of direct materials to...

```ABC Company makes and sells a single product. It requires
4 pounds of direct materials to produce one unit of this
product. Budgeted units to be produced for the next four
months is given below:

Budgeted Units to be Produced
July                      ?????? units
August                    17,000 units
September                 44,000 units
October                   28,000 units

The company wants to maintain monthly ending inventories of
direct materials equal to 28% of the next month's production
needs. The cost of direct materials is \$3.25 per pound.

Assume ABC Company pays for 80% of a month's purchase of
direct materials in the month of purchase and the other 20%
is paid in the following month.

Calculate the budgeted cash payments for direct materials in
September.```

 August September October Units to be produced 17000 44000 28000 Pounds of Raw Material Required for Production [4 pounds per unit] (A) 68000 176000 112000 Ending Inventory (28% of Next month Production Requirement) (B) 49280 31360 NA Beginning Inventory (C) 19040 49280 31360 Pounds of Raw Material to be purchased (A+B-C) 98240 158080 NA Amount of Purchase @ 3.25 per Pound (\$) 319280 513760
 Budgeted Cash cash payment for September Month for Purchases: Amt in \$ - 20% for Purchases done in August Month [319280*20%] 63856 - 80% for Purchases done in September Month [513760*80%] 411008 Total Cash paid in September 474864

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