Gusler corporation makes one product and has provided the following information:

budgeted sales, may 9,500 units
raw materials requirement per unit of output 2 pounds
raw materials cost $ 2.00 per pound
direct labor requirement per unit of output 2.7 direct labor-hours
direct labor wage rate $ 20.00 per direct labor-hour
predetermined overhead rate (all variable) $ 10.00 per direct labor-hour
the estimated cost of goods sold for may is closest to:

multiple choice

$646,000

$807,500

$256,500

$551,000

$807,500

Explanation:

First determine the cost per unit (U) as a function of cost of materials (M):

M = 2 * $2.00 = $4.00

And cost of labor and overhead (L):

L = 2.7*($20.00+$10.00)

L= $81.00

Total cost per unit is:

U = M + L = $4.00+ $81.00

U = $85.00

The estimate cost of goods sold for the month of May (C) is the product of the cost per unit by the number of units sold during the month (9,500):

C= $85.00*9,500

C= $807,500

Therefore, the estimated cost of goods sold for May is closest to $807,500

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