Question

Morganton Company makes one product, and it provided the following information to help prepare the master budget for its first four months of operations:a. The budget selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 9,100, 22,000, 24,000, and 25,000 units, respectively. All sales are credit.b. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.c. The ending finished goods inventory equals 20% of the following month's unit sales.d. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit requires 4 pounds of raw materials at $2.50 per pound.e. 40% of raw materials purchases are paid for in the month of purchase and 60% in the following month.f. The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor hours.g. The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $61,000.1. If 96,800 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?2. What is the estimated cost of raw materials purchases for July?3. If the cost of raw material purchases in June is $127,520, what are the estimated cash disbursements for raw materials purchases in July?4. What is the estimated accounts payable balance at the end of July?5. What is the estimated raw materials inventory Balance (in dollars) at the end of July?6. What is the total estimated direct labor costs for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?7. If the company always uses an estimated predetermined plantwide overhead rate of $12 per direct labor hour, what is the estimated unit product cost?8. What is the estimated finished goods inventory balance at the end of July, if the company always uses an estimated predetermined plantwide overhead rate of $12 per direct labor-hour?9. What is the estimated cost of goods sold and gross margin for July, if the company always uses an estimated predetermined plantwide overhead rate of $12 per direct labor hour?10. What is the estimated net operation income for July, if the company always uses an estimated predetermined plantwide overhead rate of $12 per direct labor hour?

Answer 1

Answer and Explanation:

1)

BUDGETED SELLING PRICE $ 70 *

BUDGETED UNITS IN JULY 22000

BUDGETED SALES $ 1,540,000

2)

SALES

CASH 40% $ 616,000

CREDIT 60 % OF PREVIOUS MONTH $ 382,200

RAW MATERIAL

RAW MATERIAL PURCHASES COST

40 % PAID NOW JULY $260900 $ 104,360

60 % PREVIOUS MONTH JUNE $ 159980 $ 95,988

LABOR

$12 PER HOUR * (24980 * 2)$ 599,520

VARIABLE EXPENSES $ 37,400

($1.70 * 22000)

FIXED EXPENSES $ 61,000

CASH INFLOW $ 99,932

3)

SALES IN JULY $ 1,540,000

60 % OUTSTANDING $ 924,000

4) 2980 UNITS SHOULD BE PRODUCED

JUNE JULY AUGUST SEP

SALES UNIT 9100 22000 24000 25000

CLOSING UNITS4400 4800 5000 -

20% OF NEXT MONTH SALE

OPENING UNITS - 1820 4400 4800

20% OF PREVIOUS MONTH SALE

FINISHED GOODS REQUIRED

13500 24980 24600 20200

SALES + CLOSING - OPENING

RAW MATERIAL REQUIRED

54000 99920 98400 80800

FINISHED GOODS REQUIRED * 4

CLOSING UNITS9992 9840 8080 -

10% OF NEXT MONTH NEEDS

OPENING UNITS - 5400 9992 9840

10% OF PREVIOUS MONTH NEEDS

RAW MATERIAL PURCHASES

63992 104360 96488 70960