Petrini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: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.Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.The ending finished goods inventory equals 30% of the following month's sales.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.Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours.Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour.The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $70,000.The estimated finished goods inventory balance at the end of February is closest to:

A) $74,880
B) $362,160
C) $316,080
D) $287,280

Question

Avery Smith · Accepted Answer

Final Answer : B, Explanation :  The ending finished goods inventory equals 30% of the following month's sales. The budgeted unit sales for March are 12,000 units. Therefore, the ending finished goods inventory for February should be 30% of 12,000 units, which is 3,600 units. The budgeted cost of goods sold per unit is $74.80 (110 selling price - 4 raw materials cost - 23 direct labor cost - 8 manufacturing overhead cost - 1.70 variable selling and administrative expense). Therefore, the ending finished goods inventory for February should be $362,160 (3,600 units x $74.80 cost per unit).

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