Sleeter Corporation makes one product and it provided the fo

Sleeter Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:

a. Budgeted unit sales for April, May, June, and July are 7,500, 11,900, 10,800, and 14,800 units, respectively. All sales are on credit.

b. The ending finished goods inventory equals 30% of the following month\'s sales.

c. The ending raw materials inventory equals 30% of the following month\'s raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $5.00 per pound.

If 72,000 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

A) $347,100

B) $350,970

C) $455,100

D) $559,230

Solution

May Budgeted sales       11,900 Add: Ending finished inventory (10,800*30%)         3,240 Less: Beginning finished goods inevntory (11,900*30%)         3,570 Finished goods to be produced       11,570 Raw materail required for production                 6 total raw materail required for production       69,420 Add: Ending rawmaterial (72,000*30%)       21,600 Less: Beginning raw material (69,420*30%)       20,826 Raw material to be purchased in units       70,194 Material price $5 Budgeted cost of raw material purchases ($5*70,194) $350,970