Question:
(Production, purchases, cash disbursements) West Indies Tea Company has budgeted sales of 300,000 cans of iced tea mix during June 2000 and 375,000 cans during July. Production of the mix requires 14 ounces of tea and 2 ounces of sugar. Beginning inventories of tea and sugar are as follows:
Iced tea mix 4,300 cans of finished product
Tea 2,750 pounds
Sugar 600 pounds
West Indies Tea Company generally carries an inventory of 3 percent of the following month's needs for finished goods. Raw materials are stocked in relation to finished goods ending inventory. Assuming the desired ending inventory stock is achieved, answer the following questions.
a. How many cans of iced tea mix need to be produced in June?
b. How many pounds of tea need to be purchased in June? (There are 16 ounces in a pound.)
c. How many pounds of sugar need to be purchased in June?
d. If tea and sugar cost $4.50 and $0.30 per pound, respectively, what dollar amount of purchases is budgeted for June?
e. If West Indies Tea Company normally pays for 30 percent of its budgeted purchases during the month of purchase and takes a 2 percent discount, what are budgeted cash disbursements for June purchases during June?