Assume a company’s sales budget for April and May is 38,000 units and 40,000 units, respectively. Its production budget for the same two months is 35,000 units and 36,000 units, respectively. Each unit of finished goods required 4 pounds of raw materials. The company always maintains raw materials inventory equal to 20% of the following months production needs.Also, assume the company pays $2.35 per pound of raw material. It always pays for 50% of its raw material purchases in the month of purchase and the remainder in the following month. The accounts payable balance on March 31st is $138,000. What would be the accounts payable balance at the end of April? Assume a company's sales budget for April and May is 38,000 units and 40,000 units, respectively. Its production budget for the same two months is 35,000 units and 36,000units, respectively. Each unit of finished goods required 4 pounds of raw materials. The company always maintains raw materials inventory equal to 20% of the followingmonths production needs.Also assume the company pays $2.35 per pound of raw material. It always pays for 50% of its raw material purchases in the month of purchase and the remainder in thefollowing month. The accounts payable balance on March 31st is $138,000. What would be the accounts payable balance at the end of April?Multiple Choice$168,940$155,440$165,440$170,440

Solution: Accounts payable balance at the end of April = 50% of raw material purchase of April Material Purchase budget for April Particulars Amount Production units 35000 Material required per unit (In Pound) 4 Total material required for july 140000 Add: Desired ending inventory (36000*4*20%) 28800 Less: Beginning inventory 28000 Raw Material to be purchased (In Pound) 140800 Raw material cost per pound $2.35 Budgeted cost of raw material purchases $330,880.00 Accounts payable balance at the end of April = $330,880*50% = $165,440 Hence 3rd option is correct.

Answered: Assume a company’s sales budget for…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Assume a company’s sales budget for April and May is 38,000 units and 40,000 units, respectively. Its production budget for the same two months is 35,000 units and 36,000 units, respectively. Each unit of finished goods required 4 pounds of raw materials. The company always maintains raw materials inventory equal to 20% of the following months production needs.

Also, assume the company pays $2.35 per pound of raw material. It always pays for 50% of its raw material purchases in the month of purchase and the remainder in the following month. The accounts payable balance on March 31^st is $138,000. What would be the accounts payable balance at the end of April?

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