Question

Bonkowski Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations:

Budgeted selling price per unit	$	97
Budgeted unit sales (all on credit):
January		10,000
February		12,000
March		13,300
April		15,200

Raw materials requirement per unit of output		4	pounds
Raw materials cost	$	1.00	per pound
Direct labor requirement per unit of output		2.5	direct labor-hours
Direct labor wage rate	$	23.00	per direct labor-hour
Predetermined overhead rate (all variable)	$	9.00	per direct labor-hour
Variable selling and administrative expense	$	3.10	per unit sold
Fixed selling and administrative expense	$	70,000	per month

Credit sales are collected:

30% in the month of the sale

70% in the following month

Raw materials purchases are paid:

30% in the month of purchase

70% in the following month

The ending finished goods inventory should equal 30% of the following month's sales. The ending raw materials inventory should equal 10% of the following month’s raw materials production needs.

The estimated cost of goods sold for February is closest to:

• $738,000

• $270,000

• $1,008,000

• $846,000

Answer 1

Correct answer---------$1,008,000

Working

Units sold		12000
Direct material cost	(12000 x 4 x $1)	$           48,000.00
Direct labor cost	(12000 x 2.5 x $23)	$        690,000.00
Overhead	(12000 x 2.5 x $9)	$        270,000.00
Total cost of goods sold		$     1,008,000.00