Morganton Company makes one product and it provided the following information to

Question

Morganton Company makes one product and it provided the following information to help prepare the master budget for its four months of operations: (a) The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,500, 16,000, 18,000, and 19,000 units, respectively. All sales are on credit. (b) Forty-percent of credit sales are collected in the month of the sale and 60% in the following month. (c) The ending finished goods inventory equals 20% of the following month

Explanation / Answer

Raw materials to be purchased Budgeted required raw materials for production for july = 20000 x 5 = 100000 pounds. Raw materials for production = Opening + purchases - closing Raw materials 100000 = 0.1(100000) + X - 0.1(22000 x 5) => 100000 = X -1000 => X = 101000 pounds. cost of raw materials purchases for July = 101000 pounds x 2 = $202000

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