Hesterman Corporation makes one product and has provided the following informati

Question

Hesterman Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations:

Credit sales are collected:

40% in the month of the sale

60% in the following month

The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month’s raw materials production needs.

If 39,720 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

Multiple Choice

$145,224

$124,992

$101,160

$104,760

Budgeted selling price per unit $ 118 Budgeted unit sales (all on credit): April 7,800 May 9,400 June 14,000 July 12,100

Explanation / Answer

Budgeted cost of raw material purchase in may = (11240*3)+(39720*20%)-(11240*3*20%) = 34920

Raw material purchase cost in may = 34920*3 = 104760

so answer is d) 104760

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