Question

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

1. The budgeted selling price per unit is $110. Budgeted unit sales for January, February, March, and April are 7,500, 10,600, 12,000, and 11,700 units, respectively. All sales are on credit.
2. Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.
3. The ending finished goods inventory equals 30% of the following month's sales.
4. The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $4.00 per pound.
5. Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.
6. The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours.
7. Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour.
8. The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $70,000.

If the company estimates that it will need 59,550 pounds of raw material to satisfy production needs in March, then the raw materials inventory balance at the end of February should be closest to:

A. $244,220

B. $23,820

C. $22,040

D. $222,180

Answer 1

Ans:Option B :$23820 is Correct Answer

Estimated raw materials inventory balance in pounds	5955	=59550*10%
X Cost per pound	4
Raw materials inventory balance at the end of February	23820
Option B $23,820 is correct