RPR, Inc., anticipates that 120,000 units of product K will be sold during May.
ID: 2361636 • Letter: R
Question
RPR, Inc., anticipates that 120,000 units of product K will be sold during May. Each unit of product K requires four units of raw material A. Actual inventories as of May 1 and budgeted inventories as of May 31 follow. 1-May 31-May Product K (Units) 55,000 60,000 Rate Materials A (Units) 40,000 37,000 Each unit of raw material A costs $8; RPR pays for all purchases in the month of acquisition. Invoices that account for 80% of the cost of materials acquired will be paid within 10 days of receipt, entitling the company to a 2% cash discount. a.Determine the number of units of product K to be manufactured in May. b.Compute the May cash outlay for purchases of raw material A. July August September Beginning cash balance $10,000 $ ? $ ? Add: Cash receipts 50,000 63,000 71,000 Deduct: Cash payments -64,000 -58,000 -64,000 Cash excess (deficiency) before financing ($4,000) $ ? $ ? Financing Borrowing to maintain minimum balance ? ? ? Principal repayment ? ? ? Interest payment ? ? ? Ending cash balance $ ? $ ? $ ?Explanation / Answer
a. Determine the number of units of product K to be manufactured in May.
120,000 + 60,000 – 55,000 = 125,000 units required to be produced
b. Compute the May cash outlay for purchases of raw material A.
Total raw materials required =
125,000 x 4 = 500,000 units
Add : Ending inventory 37,000 units
Total raw materials required 537,000 units
Less : Beginning balance 40,000 units
Raw materials to be purchased 497,000 units
497,000 x 80% = 397,600 x 8 x 98% $3,117,184
497,000 x 20% = 99,400 x 8 $795,200
Total May cash outlay for RM $3,912,384
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