Question

Required Information [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 $60. Budgeted unit sales for June, July, August, and September are 9,200, 23,000, 25,000, and 26,000 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 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 4 pounds of raw materials. The raw materials cost $2.50 per pound. e. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month. 1. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours. 9. The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $62,000. 5. If 100,800 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July? Raw materials to be purchased pounds

Answer 1

Calculate the number of pounds of raw materials to be purchased in July as follows:

	A	B
1		July
2	Budgeted sales	23000
3	Add: Required ending inventory of finished goods	5000
4	Total units required	28000
5	Less: Beginning inventory of finished goods	4600
6	Units to be produced	23400
7	Pounds of raw materials required per unit	4
8	Pounds of raw material required for budgeted production in July	93600
9	Add: Required ending inventory of raw materials	10080
10	Total pounds of raw materials required	103680
11	Less: Beginning inventory of raw materials	9360
12	Raw materials to be purchased	94320
		July
	Budgeted sales	23000
	Add: Required ending inventory of finished goods	5000
	Total units required	28000
	Less: Beginning inventory of finished goods	4600
	Units to be produced	23400
	Pounds of raw materials required per unit	4
	Pounds of raw material required for budgeted production in July	93600
	Add: Required ending inventory of raw materials	10080
	Total pounds of raw materials required	103680
	Less: Beginning inventory of raw materials	9360
	Raw materials to be purchased	94320

Therefore,

Raw materials to be purchased = 94,320 pounds

Figures shown in the above table have been calculated in the following manner:

	July
Budgeted sales	23000
Add: Required ending inventory of finished goods	=25000*0.2
Total units required	=B2+B3
Less: Beginning inventory of finished goods	=23000*0.2
Units to be produced	=B4-B5
Pounds of raw materials required per unit	4
Pounds of raw material required for budgeted production in July	=23400*4
Add: Required ending inventory of raw materials	=100800*0.1
Total pounds of raw materials required	=B8+B9
Less: Beginning inventory of raw materials	=93600*0.1
Raw materials to be purchased	=B10-B11