Bonkowski Corporation Makes One Product and Has Provided the Following

question 21

Multiple Choice

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 expected cash collections for February is closest to:

• A) $970,000
• B) $1,028,200
• C) $349,200
• D) $679,000

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Definitions:

Income Statement

A financial statement that shows a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating how much contributes towards covering fixed costs and generating profit.

Gross Margin

A financial measurement that calculates the difference between a company’s total revenue and the cost of goods sold, expressed as a percentage of total revenue.

Variable Costing

An accounting method that records variable costs (costs that change with production levels) as product costs, while fixed costs are recorded as expenses in the period they are incurred.