Question

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Receivables are collected 40% in the month of sale, 45% in the month following sale, and 15%...

Receivables are collected 40% in the month of sale, 45% in the month following sale, and 15% in the second month following sale.

Budgeted sales: July $28,000, August $24,000, September $30,000

Determine the September ending receivables balance:

1.b. The budgeted sales volume is 8,700 units. Inventories planned for the period :

Beginning Ending

Direct material 8,000 8,500

Finished goods 2,400 2,800

Each unit of finished goods requires four units of direct material in production.

Work in process inventory is zero at the beginning and end of the period.

Determine the number of units of direct material to be purchased.

Expert Solution

Solution

Computation of September ending receivable balance :

Particulars	Working	Amount in $
Cash received in month of sale	(40% of $ 30,000) (40%of current month sales)	$ 12,000
Cash collected from previous month ( August)	45% of $ 24,000 [45% of past month sales(august)]	$ 10,800
Cash collected from previous months ( July)	15 % of $ 28,000 [ 15 % of past month sales ( July)]	$ 4200
September ending receivable balance		$ 27,000 ($12,000+$10,800+$4200)

Computation of production budget

Each unit requires = 4 units of direct material

Production budget

Particulars	Number of units
Budgeted sales	8700 units
Add: Ending inventory	2800 units
Less : Beginning inventory	(2400) units
Budgeted production of finished goods	9100 units

direct material consumed : Budgeted production of finished goods * direct materials required per unit

= 9100 units * 4 units of direct material

= 36,400 units of direct material is consumed

Computation of direct material purchase budget in units

Particulars	Number of units
Direct material consumed	36,400 units
Add: Ending inventory of direct material	8,500 units
Less: Beginning inventory of direct material	(8,000 units)
Number of units of direct material to be purchased	36,900 units

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ekkarill92 answered 2 years ago

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