Maxim Fasteners Distributes Giant Binder Clips That Sell for $3

question 22

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 2017 are as follows:
$$\begin{array} { l l l } \text { - January } & 6,000 \text { units } \\\text { - February } & 5,000 \text { units } \\\text { - March } & 7,000 \text { units } \\\text { - April } & 9,000 \text { units } \\\text { - May } & 8,000 \text { units }\end{array}$$
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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