RPR Inc. anticipates that 120,000 units of product K will be sold during May. Ea
ID: 2363374 • 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: May 1 May 31 Product K (units) 55,000 60,000 Raw material 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. Determine the number of units of product K to be manufactured in May. Compute the May cash outlay for purchases of raw material A. I'm using your information to double check my calculationsExplanation / Answer
Number of units need to be produced = Sales + Ending inventory - Opening inventory = 120000 + 60000 - 55000 = 125000 units
Number of raw materials needed in production = 125000 x 4 = 500000 units
Number of raw materials need to be purchased = 500000 + 37000 - 40000 = 497000units
Total cost of raw materials = 497000 x 8 = $3,976,000
Cash outlay for purchases = 3976000 x 0.8 x 0.98 + 3976000 x 0.2 = $3912384
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