Question

In July what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases in June is $136,560; and 96,250 pounds of raw materials are needed to meet production in August.

Answer 1

Answer:

The first part of the question is missing, so I looked for a similar question and found:

Each unit of finished goods requires 4 pounds of raw materials (at $2 per pound). The ending raw materials inventory equals 40% of the following month’s raw materials production needs. If 80,600 pounds of raw materials are required for production in July. The corporation pays for 40% of its raw materials purchases in the month of purchase and 60% in the following month.

Raw materials purchases during July:

production requirements = 80,600 pounds

- beginning inventory = 80,000 x 40% = -32,000 pounds

+ ending inventory = 96,250 x 40% = 38,500 pounds

total materials purchases = 87,100 pounds

x $2 per pound = $174,200

cash disbursements during July = (June's purchases x 60%) + (July's purchases x 40%) =  ($136,560 x 60%) + ($174,200 x 40%) = $151,616