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 selling and administrative expense for February 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 selling and administrative expense for February is closest to:

Quizplus · Accepted Answer

To prepare the master budget, we need to consider the following components:

1. Sales budget:
Month   Sales   Collection (30%)   Collection (70%)
-------------------------------------------
Jan      $100           $30                  $70
Feb      $150           $45                $105
Mar      $200           $60                $140
Apr      $120           $36                  $84

2. Production budget: 
Month   Sales   Ending FG Inventory   Total Units Required   Production Needed
------------------------------------------------------------------------------
Feb      $150         45 (30%)                 158                      163
Mar      $200         48 (30%)                 172                      180
Apr      $120         36 (30%)                 130                      134
May                                       156                      166

3. Raw materials budget:
Month   Production Needed   Ending RM Inventory   Total RM Required   Purchases (30%)   Purchases (70%)
--------------------------------------------------------------------------------------------------
Feb                163                     14 (10%)                     163                        49                              114
Mar                180                     16 (10%)                     180                        54                              126
Apr                134                     15 (10%)                     134                        40                              94
May                166                                            50                              116

4. Selling and administrative expense budget:
Month   Budget Amount
----------------------
Feb         $107,200
Mar         $110,000
Apr         $118,000
May         $120,000

The estimated selling and administrative expense for February is closest to $107,200 (option C).

Bonkowski Corporation Makes One Product and Has Provided the Following