Question: New Ventures intends to start business on January 1 Production

New Ventures intends to start business on January 1. Production plans for the first four months of operations are as follows:
January ..... 20,000 units
February ...... 50,000 units
March ....... 70,000 units
April ...... 70,000 units

Each unit manufactured requires 2 pounds of material. The firm would like to end each month with enough raw material inventories to cover 25% of the following month’s production needs. The material costs $7 per pound. Management anticipates paying for 40% of its purchases in the month of purchase. They will receive a 10% discount for these early payments. They anticipate having to defer payment to the next month on 60% of their purchases. No discount will be taken on these late payments. There are no inventories on January 1.

Prepare a cash disbursements budget for materials for each of the first three months of operations.

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  • CreatedJanuary 26, 2015
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