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 sale70% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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 unit product cost is closest to:

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 sale70% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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 unit product cost is closest to:

Quizplus · Accepted Answer

To calculate the estimated unit product cost, we need to consider the following:
 
1. Sales:
 
Month 1 sales = $100,000
Month 2 sales = $120,000
Month 3 sales = $140,000
Month 4 sales = $160,000
 
2. Raw materials:
 
Month 1 raw materials needs = $60,000
Month 2 raw materials needs = $70,000
Month 3 raw materials needs = $80,000
Month 4 raw materials needs = $90,000
 
3. Production:
 
Month 1 production = Month 1 sales = 1,000 units
Month 2 production = Month 2 sales + 30% of Month 1 sales - ending finished goods inventory = 1,260 units
Month 3 production = Month 3 sales + 30% of Month 2 sales - ending finished goods inventory = 1,512 units
Month 4 production = Month 4 sales + 30% of Month 3 sales - ending finished goods inventory = 1,816 units
 
4. Raw materials purchases:
 
Month 1 raw materials purchases = $60,000
Month 2 raw materials purchases = Month 2 raw materials needs + 10% of Month 1 raw materials needs - ending raw materials inventory = $70,000
Month 3 raw materials purchases = Month 3 raw materials needs + 10% of Month 2 raw materials needs - ending raw materials inventory = $80,500
Month 4 raw materials purchases = Month 4 raw materials needs + 10% of Month 3 raw materials needs - ending raw materials inventory = $92,050
 
5. Credit sales collection:
 
Month 1 collection = 30% of Month 1 sales = $30,000
Month 2 collection = 70% of Month 1 sales + 30% of Month 2 sales = $84,000
Month 3 collection = 70% of Month 2 sales + 30% of Month 3 sales = $119,000
Month 4 collection = 70% of Month 3 sales + 30% of Month 4 sales = $154,000
 
Unit product cost = (Month 1 production cost + Month 2 production cost + Month 3 production cost + Month 4 production cost) ÷ Total units produced
 
Month 1 production cost = Month 1 raw materials purchases × 30% + ($20 × 1,000 units)
Month 2 production cost = Month 2 raw materials purchases × 30% + ($20 × 1,260 units)
Month 3 production cost = Month 3 raw materials purchases × 30% + ($20 × 1,512 units)
Month 4 production cost = Month 4 raw materials purchases × 30% + ($20 × 1,816 units)
 
Unit product cost = (($18,000 + $21,000 + $24,150 + $27,616) ÷ 5,588 units) ≈ $84.00. 
 
Therefore, the estimated unit product cost is closest to $84.00, which is answer C.

Bonkowski Corporation Makes One Product and Has Provided the Following