production; purchases; cash disbursement
So Sweet! has budgeted sales of 600,000 cans of diet iced tea mix during June 2010 and 750,000 cans during July. Production of the mix requires 14.5 ounces of tea and 1.5 ounces of sugar substitute. June 1 inventories of tea and sugar substitute are as follows:
Iced tea mix …………………………….. 24,600 cans of finished product
Tea ………………………………………… 750 pounds
Sugar substitute …………………………….. 200 pounds
So Sweet! generally carries a finished goods inventory equal to 5 percent of the following month’s needs; raw material ending inventories should equal 10 percent of Finished Goods Inventory. Assuming that the ending inventory policy is met, answer the following questions.
a. How many cans of iced tea mix will be produced in June?
b. How many pounds of tea will be purchased in June?
c. How many pounds of sugar substitute will be purchased in June?
d. Tea and sugar substitute cost $3.50 and $0.40 per pound, respectively. What dollar amount of raw material purchases is budgeted for June?
e. If the company normally pays for 40 percent of its budgeted purchases during the month of purchase and takes a 2 percent discount, what are budgeted cash disbursements in June for June purchases? How much will So Sweet! Owe for June purchases in July?