Michard 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 $125. Budgeted unit sales for April, May, June, and July are 7,600, 10,500, 13,800, and 12,900 units, respectively. All sales are on credit.Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month.The ending finished goods inventory equals 20% of the following month's sales.The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.00 per pound.Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month.The direct labor wage rate is $25.00 per hour. Each unit of finished goods requires 3.0 direct labor-hours.The variable selling and administrative expense per unit sold is $3.40. The fixed selling and administrative expense per month is $80,000.The estimated selling and administrative expense for May is closest to:

A) $115,700
B) $80,000
C) $77,130
D) $35,700

Question

Maddie Blair · Accepted Answer

Final Answer : A, Explanation :  The estimated selling and administrative expense for May includes both variable and fixed expenses. The variable expense is calculated as $3.40 per unit sold times the number of units sold in May (10,500 units), which equals $35,700. The fixed selling and administrative expense is $80,000. Therefore, the total estimated selling and administrative expense for May is $35,700 (variable) + $80,000 (fixed) = $115,700.

Definitions

Learning Objectives

Learning Objectives

Related questions