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.

Construct a Selling and Administrative Expense Budget:

Morganton Company
Selling and Administrative Expense Budget
			June	July	August	September	Total
Budgeted Unit Sales
Variable Selling and Administrative Expense per Unit
Variable Selling and Administrative Expense
Fixed Selling and Administrative Expenses:
Total Fixed Selling and Administrative Expenses
Total Selling and Administrative Expenses
Less Depreciation
Cash Disbursements for Selling and Administrative Expenses

Answer 1

Morganton Company
Selling and Administrative Expense Budget
	June	July	August	September	Total
Budgeted Unit Sales (a)	8,200	12,000	14,000	15,000	49,200
Variable Selling and Administrative Expense per unit (b)	$1.30	$1.30	$1.30	$1.30	$1.30
Variable Selling and Administrative Expense (c = a*b)	$10,660	$15,600	$18,200	$19,500	$63,960
Fixed Selling and Administrative Expenses	$62,000	$62,000	$62,000	$62,000	$248,000
Less: Depreciation	$0	$0	$0	$0	$0
Total Fixed Selling and Administrative Expenses (d)	$62,000	$62,000	$62,000	$62,000	$248,000
Cash Disbursements for Selling and Administrative Expenses (c + d)	$72,660	$77,600	$80,200	$81,500	$311,960

Note: Depreciation expenses are not given, hence, shown as $0.