Maxim Fasteners Distributes Giant Binder Clips That Sell for $3

question 55

Multiple Choice

Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20 to buy each clip. The company has $4,000 per month in fixed costs. Policies and other information follow:
.Inventory is maintained at the end of each month equal to 10% of the next month's projected sales in units.
.Purchases are paid 40% in the month acquired and the balance in the month after.
.All sales are on credit, and 30% are collect in the month of sale and 70% in the month after sale.
.Budgeted monthly sales in units for the first five months of 2014 are as follows:

$\begin{array}{ll}\text { January } & 6,000 \text { units } \\\text { February } & 5,000 \text { units } \\\text { March } & 7,000 \text { units } \\\text { April } & 9,000 \text { units } \\\text { May } & 8,000 \text { units }\end{array}$
Variable selling and administrative costs are $0.50 per clip.
How much is the budgeted purchase cost of inventory during March?

• A) $7,200
• B) $8,640
• C) $8,400
• D) $9,480

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