Question

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

1. The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 8,200, 12,000, 14,000, and 15,000 units, respectively. All sales are on credit.
2. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
3. The ending finished goods inventory equals 20% of the following month’s unit sales.
4. 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.
5. Twenty percent of raw materials purchases are paid for in the month of purchase and 80% in the following month.
6. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours.
7. The variable selling and administrative expense per unit sold is $1.30. The fixed selling and administrative expense per month is $62,000.
8. There is no fixed manufacturing overhead and the variable manufacturing overhead is $8 per direct labor hours.

Construct a Budgeted Income Statement:

Morganton Company
Budgeted Income Statement
For the Period Ended September 30, 2018 ( in units)
Sales
Cost of Goods Sold
Gross Margin
Selling and Administrative Expenses
Net Operating Income
Net Income

Answer 1

Solution:

9 Computation of budgeted manufacturing cost per units - Morganton Company Particulars Per Unit 10 Direct Material (5*$2) $10.00 11 Direct labor (2*$13) $26.00 12 Variable manufacturing overhead (2*$8) $16.00 13 Fixed manufacturing overhead $0.00 14 Budgeted manufacturing cost per unit $52.00 16 17 18 20 19 Budgeted Income Statement Particulars June July August September 21 Sales revenue (sale units *$65) $533,000.00 $ 780,000.00 $910,000.00 $975,000.00 22 Cost of goods sold (units *$52) $426,400.00 $624,000.00 $728,000.00 $ 780,000.00 23 Gross Margin | $106,600.00 $156,000.00 $182,000.00 $195,000.00 24 Selling and administrative expenses ($62000 + sale units *$1.30) $72,660.00 $77,600.00 $80,200.00 $81,500.00 25 $33,940.00 $78,400.00 $101,800.00 $113,500.00 26 Net operating income 27 29 30 34 35 36 37 42 43 44 45 et159 Sheet578 (3) ) Sheet161 ) Sheet158 Sheet269