Question

Morgatnon Company makes one product and it provided the following information to help prepare the master budget: A. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,600, 17,000, 19,000, and 20,000 units, respectively. All sales are on credit. B. Thirty percent of credit sales are collected in the month of the sale and 70% in the following month. C. The ending finished good inventory equals 25% of the following month's unit sales. D. The ending raw materials inventory equals 10% of the following months raw materials production needs. each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.40 per pound. e. thirty five percent of raw materials purchases are paid for in the month of purchase and 65% in the following month. F. the direct labor wage rate is $14 per hour. each unit of finished good requires two direct labor-hours. G. the variable selling and administrative expense per unit sold is $1.80. the fixed selling and administrative expense per month is $67,000. Q1 if 96,250 pounds of raw materials are needed to meet production in august, how many pounds of raw materials should be purchased in july? Q2 if 96,250 pounds of raw materials are needed to meet production in august, what is the estimated cost of raw materials purchases for july? Q3 in july what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases in june is $136,560; and 96,250 pounds of raw materials are needed to meet production in august. Q4 If 96250 pounds of raw materials are needed to meet production in august, what is the estimated accounts payable balance at the end of july? Q5 if 96,250 pounds of raw materials are needed to meet production in august, what is the estimated raw materials inventory balance at the end of july? Q6 what is the total estimated direct labor cost for july assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced? Q7 if we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated unit product cost? (round your answer to 2 decimal places.) Q8 if we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated finished good inventory balance at the end of july? Q9 if we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated cost of goods sold and gross margin for July? estimated cost of good sold? estimated gross margin? Q10 what is the estimated total selling and administrative expense for july? Q11 is we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated net operating income for july?

Answer 1

Working notes:

	June	July	August	September
Budgeted unit sales	8600	17000	19000	20000
Add: Ending Finished goods inventory	4250	4750	5000
Less: Beginning finished goods inventory		-4250	-4750	-5000
Budgeted production units		17500	19250
Raw material required per unit (in pounds)		5	5
Budgeted raw material needed (in pounds)		87500	96250
Add: Ending raw material inventory		9625
Less: Beginning raw material inventory		8750
Budgeted raw material purchases (in pounds)		88375

1. Pounds of raw material purchased in July = 88,375 pounds

2. Estimated cost of raw material purchases in July = 88,375*$2.40 = $212,100

3. Total estimated cash disbursements for raw material purchases in July = $162,999 (136,560*65%+212,100*$35%)

4. Estimated accounts payable balance at the end of July = $137,865 (212,100*65%)

5. Estimated raw material inventory balance at the end of July = 9,625 pounds

6. Total estimated direct labor cost for July = 17,500*2*$14 = $490,000

7. Estimated unit product cost = $52 (5*$2.40+2*$14+2*$6)

8. Estimated finished goods inventory balance at the end of July = 4,750 units

9. Estimated cost of goods sold for July = 17,000*$52 = $884,000

Estimated gross margin = $1,020,000 - 884,000 = $136,000

10. Estimated total selling and administrative expense for July = $97,600 (17,000*$1.80+67,000).

11. Estimated net operating income for July = $136,000 - 97,600 = $38,400