Question

# The budgeted selling price per unit is \$60. Budgeted unit sales for June, July, August, and...

1. The budgeted selling price per unit is \$60. Budgeted unit sales for June, July, August, and September are 8,900, 20,000, 22,000, and 23,000 units, respectively. All sales are on credit.
2. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
3. The ending finished goods inventory equals 20% of the following month’s unit sales.
4. The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost \$2.50 per pound.
5. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
6. The direct labor wage rate is \$13 per hour. Each unit of finished goods requires two direct labor-hours.
7. The variable selling and administrative expense per unit sold is \$1.50. The fixed selling and administrative expense per month is \$70,000.

If 111,000 pounds of raw materials are needed to meet production in August, what is the estimated cost of raw materials purchases for July?

 Estimated Raw material purchases of July: Production units: July Aug Sales units 20000 22000 Add: Ending inventory 4400 4600 Total Needs 24400 26600 Less: beginning Inventory 4000 4400 Budgeted production units 20400 22200 RM required per unit 5 5 Total Raw material requirement 102000 111000 Add: Ending inventory of RM 11100 Total needs 113100 Less: Beginning Inventory of RM 10200 Budgeted Purchase units 102900 Cost per pound 2.5 Budgeted Purchase cost in \$ 257250

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