Question

 The Foundational 15 [LO8-2, LO8-3, LO8-4, LO8-5, LO8-7, LO8-9, LO8-10]

 [The following information applies to the questions displayed below.]

 Morganton Company makes one product and it provided the following information to help prepare the master budget:

 a. The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,400, 10,000, 12,000, and 13,000 units, respectively. All sales are on 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 of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.

 e. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month. f. The direct labor wage rate is $15 per hour. Each unit of finished goods 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 $60,000.

 Foundational 8-5

 5. If 61,000 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

 Foundational 8-6

 6. If 61,000 pounds of raw materials are needed to meet production in August, what is the estimated cost of raw materials purchases for July?

 Foundational 8-7

 7. In July what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases in June is $88,880.

 Foundational 8-8

 8. If 61,000 pounds of raw materials are needed to meet production in August, what is the estimated accounts payable balance at the end of July?

 Foundational 8-9

 9. If 61,000 pounds of raw materials are needed to meet production in August, what is the estimated raw materials inventory balance at the end of July?

Answer 1

	June	July	August	September
Budgeted sales units	8400	10000	12000	13000
Add: Ending finished goods inventory	2,000	2400	2600
Less: Beginning finished goods inventory		2000	2400
Budgeted production units		10400	12200
Raw material required in pounds		5	5
Raw material needed for production (pounds)		52,000	61,000
Add: Ending raw material inventory		6,100
Less: Beginning raw material inventory		5,200
Raw material purchases		52,900

6.

Cost of raw material to be purchased = 52,900*$2 = $105,800

7.

Total cash disbursements = $105,800*30% + 88,880*70% = $93,956

8.

Accounts payable = $105,800*70% = $74,060

9.

Raw material inventory balance = 6,100 * $2 = $12,200