a. A company produces and sells bottled water. The company\'s controller has the

Question

a.

A company produces and sells bottled water. The company's controller has the following information available from the static budget of one of the product lines for the month of April:

Estimated production

20,000 units

Direct material per unit

2 ounces

Direct material cost per unit

$.15 per ounce

Actual production during April was 18,000 units and actual direct materials cost was $6,300. If the company prepares a flexible budget for April, direct materials cost is estimated to be:

b. A firm expects to make purchases of $100,000 in January; $450,000 in February; $400,000 in March; and $230,000 in April. Purchases are paid 30% in the month of purchase and 70% in the month after purchase. How much is budgeted accounts payable at the end of February?

Estimated production

20,000 units

Direct material per unit

2 ounces

Direct material cost per unit

$.15 per ounce

Explanation / Answer

Actual production = 18,000 units.

Direct material cost estimated for the production of 18,000 units is

= 18,000 units * 2 ounces * 0.15 per ounce

= $5,400

According to flexible budget, the direct material cost is $5,400.

b.

Budget Accounts payable for the month of february is 70% of the purchases in February.

Budgeted accounts payable = $450,000 * 0.70 = $315,000.

Therefore, the budgeted accounts payable at the end of February is $315,000.

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