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 budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,900, 30,000, 32,000, and 33,000 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 30% of the following month’s unit sales.

d. The ending raw materials inventory equals 20% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.50 per pound.

e. Forty percent 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 $1.90. The fixed selling and administrative expense per month is $69,000.

1. What are the budgeted sales for July?
2. What are the expected cash collections for July?
3. What is the accounts receivable balance at the end of July?
4. According to the production budget, how many units should be produced in July?
5. If 129,200 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?
6. What is the estimated cost of raw materials purchases for July?
7. If the cost of raw material purchases in June is $188,640, what are the estimated cash disbursements for raw materials purchases in July?
8. What is the estimated accounts payable balance at the end of July?
9. What is the estimated raw materials inventory balance at the end of July?
10. 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?
11. If the company always uses an estimated predetermined plantwide overhead rate of $11 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)

Answer 1

		Budgeted sales quantity in July	30000
		Budgeted sales price per unit	$65
		Budgeted sales for July	$1,950,000	(30000*$65)
		Budgeted sales in June	$643,500	(9900*65)
		Collection from June sales in july	$386,100	(643500*0.6)
		Collection from July sales in july	$780,000	(1950000*0.4)
		Expected cash collection for July	$1,166,100	(386100+780000)
		Accounts Receivable balance at end of July	$1,170,000	(0.6*1950000)
	A	Sales in units in July	30000
	B	Beginning inventory in July	9000	(0.3*30000)
	C	Sales in units in August	32000
	D=0.3*C	Ending inventory in July	9600
	E=A+D-B	Number of units to be produced in July	30600