Stefanovich Corporation makes one product. The company has provided the followin

Question

Stefanovich Corporation makes one product. The company has provided the following information concerning its raw materials needs:

The ending raw materials inventory should equal 20% of the following month’s raw materials production needs.

Each unit of finished goods requires 2 pounds of raw materials.

The raw materials cost $3.00 per pound.

The company will need 26,440 pounds of raw material to satisfy production needs in March.

The raw materials inventory balance at the end of February should be closest to:

Multiple Choice

$74,136

$14,568

$88,704

$15,864

Explanation / Answer

D. $15,864

The estimated raw materials inventory balance at the end of February is computed as follows:

Ending raw materials inventory 26,440 pounds × 20% (a) 5,288 Cost per pound (b) $3.00 Raw material inventory balance (a) × (b) $15,864

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