Bonkowski Corporation Makes One Product and Has Provided the Following

question 188

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.
-If the company estimates that it will need 55,480 pounds of raw material to satisfy production needs in March,then the raw materials inventory balance at the end of February should be closest to:

• A) $55,108
• B) $50,152
• C) $4,956
• D) $5,548

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Definitions:

Direct Method

An approach to cash flow statement preparation that lists major classes of gross cash receipts and payments.

Depreciation Expense

The allocated portion of the cost of a tangible asset over its useful life, reflecting wear and tear.

Operating Activities

Activities that are directly related to running a business and generating revenue, such as sales and purchasing materials.

Operating Expenses

Costs associated with running a business's core operations, excluding the cost of goods sold.