Asked by Olayinka Afelumo on May 20, 2024
Verified
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.If the budgeted cost of raw materials purchases in February is $222,180, then the budgeted accounts payable balance at the end of February is closest to:
A) $222,180
B) $88,872
C) $117,912
D) $133,308
Accounts Payable
Liabilities or amounts owed by a company to suppliers for purchases made on credit.
Raw Materials Purchases
Transactions related to buying the basic materials that are needed to manufacture goods.
Budgeted Cost
An estimated cost of activities, resources, assets, or liabilities that a company anticipates incurring during a specified period.
- Assess the handling of accounts payable and receivable in relation to the management of cash flow.
Verified Answer
MG
Moses GlitchMay 21, 2024
Final Answer :
D
Explanation :
The budgeted accounts payable balance at the end of February includes payments for raw materials purchased in February and January. For February, 40% is paid in the same month, so 60% is carried over to March. The cost of raw materials purchases in February is $222,180, so the amount carried over is 60% of $222,180 = $133,308. There's no need to consider January's purchases since the question specifically asks for the end of February's balance, and the calculation provided directly leads to the correct answer.
Learning Objectives
- Assess the handling of accounts payable and receivable in relation to the management of cash flow.
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