Exhibit 10-2

Bennys Bakery produces bagels for resale at local grocery stores. The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels). Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour. Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour. Last year's sales were expected to total 40,000 units. Benny just received last year's actual results showing sales of 35,000 units.

50. Refer to Exhibit 10-2. What amount would the flexible budget show for direct materials?

a. $1,000,000

b. $350,000

c. $140,000

d. $875,000

e. None of the answer choices is correct.