Question

Cahuilla Corporation predicts the following sales in units for the coming four months:

		April		May		June		July
Sales in Units		420		460		480		420

Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 Finished Goods inventory is 168 units. A finished unit requires 5 pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 270 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted cost of direct material B during May should be:

Multiple Choice

a. $468.

b. $6,048.

c. $456.

d. $3,276.

e. $4,644.

Answer 1

Answer is e. $ 4644
PRODUCTION BUDGET
			APRIL	MAY	JUNE	July
Budgeted Sales Units			420	460	480	420
Add: Desired Ending Finished inventory			184	192	168
Total Needs			604	652	648
Less: Beginning Finished Inventory			168	184	192
Required Production in units			436	468	456
RAW MATERIAL PURCHASE BUDGET
			APRIL	MAY	JUNE
Budgeted Sales units			436	468	456
Raw material required per unit			5	5	5
Total Production needs			2,180	2,340	2,280
Add: Desired Ending Inventory			702	684
Total needs			2,882	3,024
Less: Beginning Inventory			654	702
Purchase Units			2,228	2,322
Cost price per unit			2.00	2.00
Budgeted Purchase in $			4,456	4,644