Luchini Corporation Makes One Product and It Provided the Following

question 192

Multiple Choice

Luchini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:
a. The budgeted selling price per unit is $111. Budgeted unit sales for April, May, June, and July are 7,100, 10,100, 13,300, and 14,000 units, respectively. All sales are on credit.
b. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month.
c. The ending finished goods inventory equals 10% of the following month's sales.
d. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $5.00 per pound.
e. Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.
f. The direct labor wage rate is $18.00 per hour. Each unit of finished goods requires 2.9 direct labor-hours.
g. Variable manufacturing overhead is $7.00 per direct labor-hour. Fixed manufacturing overhead is zero.
-If 66,850 pounds of raw materials are required for production in June,then the budgeted raw material purchases for May is closest to:

• A) 52,100 pounds
• B) 72,155 pounds
• C) 87,785 pounds
• D) 56,525 pounds

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Definitions:

Property Ownership

The legal right or title that an individual or entity has over property, including the right to use, sell, lease or transfer it.

Involuntary Bailee

An individual or entity that unintentionally finds themselves in possession of someone else's property and is responsible for its care.

Destroy

To cause something to cease to exist or to put an end to something by damaging it beyond repair or recovery.

Third-party Claimant

An individual or entity that claims rights or seeks remedies under a contract to which they are not a direct party.