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	$92
Budgeted unit sales (all on credit)
July	9,000
August	11,300
September	10,400
October	10,800

Raw materials requirement per unit of output	4	pounds
Raw materials cost	$1.00	per pound
Direct labor requirement per unit of output	2.8	direct labor hours
Direct labor wage rate	$22.00	per direct labor hour
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

Raw materials purchases are paid:
30% in the month of purchase
70% in the following month

The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs.

If 41,920 pounds of raw materials are required for production in September, then the budgeted raw material purchases for August is closest to:

	A.	57,056 pounds
	B.	44,480 pounds
	C.	43,712 pounds
	D.	70,400 pounds

If 41,920 pounds of raw materials are required for production in September, then the budgeted cost of raw material purchases for August is closest to:

	A.	$57,056
	B.	$43,712
	C.	$44,480
	D.	$70,400

The estimated direct labor cost for August is closest to:

	A.	$465,000
	B.	$684,992
	C.	$31,136
	D.	$244,640

Answer 1

Production Unit of August = 11300+(10400*20%)-(11300*20%) = 11120 Units

1) Raw material purchase in August = (11120*4)+(41920*30%)-(11120*4*30%) = 43712 Pounds

So answer is c) 43712 Pounds

2) Budgeted cost of raw material purchase = 43712*1 = 43712

So answer is b) $43712

3) Direct labor cost = 11120*2.8*22 = $684992

So answer is b) $684992