Reference no: EM132984281

Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations:

Budgeted selling price per unit $ 92

Budgeted unit sales (all on credit):

July 9,000

August 11,300

September 10,400

October 10,800

Raw materials requirement per unit of output 4pounds

Raw materials cost $ 1.00per pound

Direct labor requirement per unit of output 2.8direct labor-hours

Direct labor wage rate $ 22.00 per direct labor-hour

Variable selling and administrative expense $ 1.50per unit sold

Fixed selling and administrative expense $ 70,000 per month

Credit sales are collected:

40% in the month of the sale

60% 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 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs.

Problem 1: The estimated direct labor cost for August is closest to:

Option 1: $244,640

Option 2: $684,992

Option 3: $465,000

Option 4: $31,136