Rolen, Inc., is in the process of preparing the fourth quarter budget for 2010,

Question

Rolen, Inc., is in the process of preparing the fourth quarter budget for 2010, and the following data have been assembled: The company sells a single product at a price of $25 per unit. The estimated sales volume for the next six months is as follows: September 13,000 units October 12,000 units November 14,000 units December 20,000 units January 9,000 units February 10,000 units -------------------------------------------------------------------------------- All sales are on account. The company's collection experience has been that 30% of a month's sales are collected in the month of sale, 68% are collected in the month following the sale, and 2% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $211,000 on September 30, 2010.

Explanation / Answer

this will be helpful for you 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 6,000 7,000 8,000 5,000 Converted to pounds of raw materials: 18,000 21,000 24,000 15,000 1st Quarter 18,000 + (21,000 x 25% ) - 4,500 = 18,750 pounds of materials to be purchased 18,750 x $2 = $37,500 Cost of materials to be purchased 2nd Quarter 21,000 + (24,000 x 25%) - (21,000 x 25% ) = 21,750 pounds of materials to be purchased 21,750 x $2 = $43,500 Cost of materials to be purchased 3rd Quarter 24,000 + (15,000 x 25%) - (24,000 x 25% ) = 21,750 pounds of materials to be purchased 21,750 x $2 = $43,500 Cost of materials to be purchased 4th Quarter 15,000 + 3,750 - (15,000 x 25%) = 15,000 pounds of mat

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