Sevenbergen Corporation makes one product and has provided the following informa

Question

Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations Budgeted selling price per unit Budgeted unit sales (all on credit): $ 92 July August September October 9,000 11,300 10,400 10,800 Raw materials requirement per unit of output Raw materials cost Direct labor requirement per unit of output 4 pounds s 1.00 per pound 2.8 direct labor-hours per direct labor- hour Direct labor wage rate $ 22.00 Variable selling and administrative expense 1.50 per unit sold Fixed selling and administrative expense $70,000 per month Credit sales are collected: 40% in the month of the sale 60% in the following month

Explanation / Answer

Solution: Answer is 3rd option "43,712 pounds" Working Notes: Budgeted sales in units of August 11,300 a Add: Finished inventory required end 2,080 b [20% of September sales] [20% x 10,400] Less: Beginning finished inventory (2,260) c [20% of August sales unit] [20% x 11,300] Units to be produced in August 11,120 d=a+b-c Raw material for units to be produced 44,480 e [11,120 x 4 pound] Add: Ending Raw material required 12,576 f [30% of September raw material for production required] [30% x 41,920 ] Less: Beginning inventory of raw materials (13,344) g [30% of August required Raw material for units to be produced] [30% x 44,480] Raw material need to be purchased in August 43,712 h=e+f-g Please feel free to ask if anything about above solution in comment section of the question.

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