Bonkowski Corporation makes one product and has provided the following informati

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:

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 finished goods inventory balance at the end of February is closest to:

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

Explanation / Answer

Answer

Finished Goods Inventory Balance

Finished Goods Inventory = (13300*30%) = 3990 units

Unit cost = ($1*4) + ($23*2.5) + ($3.1*9) = $89.4

Estimated Inventory Balance = ($89.4*3990 units) = $356706

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