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

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
• $256,500
• $551,000
• $807,500

  Correct

Explanation

The estimated unit product cost is computed as follows:

Direct materials	2	pounds	$	2.00	per pound	$	4.00
Direct labor	2.7	hours	$	20.00	per hour		54.00
Manufacturing overhead	2.7	hours	$	10.00	per hour		27.00
Unit product cost						$	85.00

The estimated cost of goods sold for May is computed as follows:

Unit sales (a)		9,500
Unit product cost (b)	$	85.00
Estimated cost of goods sold (a) × (b)	$	807,500