Question

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Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies:

• Ending finished goods inventory should be 40 percent of next month’s sales.
• Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

March	285
April	270
May	320
June	420
July	395
August	445

Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $8,400 ($700 per month) for expected production of 4,200 units for the year. Selling and administrative expenses are estimated at $750 per month plus $0.50 per unit sold.

     Iguana, Inc., had $11,000 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $3,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $170 in depreciation. During April, Iguana plans to pay $3,200 for a piece of equipment.

Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June).     

April May June 2nd Quarter total

1.Budgeted Sales Revenue

2.Budgeted Production in Units

3.Budgeted Cost of Raw Material Purchases

4.Budgeted Direct Labor Cost

5.Budgeted Manufacturing Overhead

6.Budgeted Cost of Goods Sold.

7.Total Budgeted Selling and Adm. Expenses

Answer 1

Solutions:

Ο μι Παμαπα Sales Budget - Iguana Inc. April May June Particulars Sales units Selling price per unit 420 270 $30.00 320 $30.00 2nd Quarter Total 1010 $30.00 9 $30.00 10 11 Budgeted Sales Revenue $8,100.00 $9,600.00 $12,600.00 $30,300.00 12 13 14 Production Budget - Iguana Inc. 15 Particulars April May June 2nd Quarter Total July 270 320 420 10101 395 Sales units Add: Desired ending inventory (40% of next month sales) Less: Opening Inventory 168 158 128 108 158 168 178 158 128 108 20 budgeted production in units 290 360 410) 1060 115 21 22 23 24 Raw Material Purchase Cost Budget - Iguana Inc. Particulars April May 25 June 2nd Quarter Total 1060 26 290360410 410 27 Unit to Produce Material needed per unit (In foot) Material needed for unit to produce 28 T 1160 1440 1640 4240 492 498 Add: Desired units of material in ending inventory (30% of next month production Less: units of material in beginning inventory 30 348 432 492 348 31 32 1244 33 Units of material to purchase Cost per feet 1500 $3.00 1646 $3.00 4390 $3.00 $3.00 Budgeted cost of raw material purchases $3,732.00 $4,500.00 $4,938.00 $13,170.00 35 36 37 38 June Budgeted direct labor cost-Iguana Inc. Particulars April May Unit to Produce 360 Direct labor required per unit (in hrs) 0.5 0.5 Required direct labor hours 145 180 Labor rate $13.00 $13.00 2nd Quarter Total 1060 290 410 0.5 205 $13.00 530 $13.00 40 41 42 43 44 45 Budgeted direct labor cost $3.770.00 $4,680.00 $5,330.00 $13.780.00 +36 (25) Sheet93 (2) Sheet702 Sheet708 (2) Sheet181 (5)

F G H I 46 48 Budgeted manufacturing Overhead cost-Iguana Inc. Particulars April May June Unit to Produce 290360410 Variable Overhead rate $0.50 $0.50 $0.50 Variable Manufacturing Overhead $145.00 $180.00 $205.00 fixed Overhead $700.00 $700.00 $700.00 49 2nd Quarter Total 1060 $0.50 $530.00 $2,100.00 50 51 Budgeted manufacturing overhead $845.00 $880.00 $905.00 $2,630.00 Budgeted Cost of goods sold-Iguana Inc. Particulars April May June 2nd Quarter Total 1010 $21.00 270 320 Unit sales Unit Product cost 420 $21.00 $21.00 $21.00 Budgeted Cost of goods sold $5,670.00 $6,720.00 $8,820.00 $21,210.00 Budgeted Selling and admin. expense- Iguana Inc. Particulars April May June Unit sales 320 Variable Selling and admin. Rate $0.50 $0.50 Variable Selling and admin. Expenses $135.00 $160.00 $210.00 Fixed Selling and admin. Expenses $750.00 $750.00 $750.00 270 420 $0.50 2nd Quarter Total 1010 $0.50 $505.00 $2,250.00 69 70 Total Selling and admin. Expenses $885.00 $910.00 $960.00 $2,755.00 71 72 73 74 75 76 77 79 80 81 82 83 84 86 87 88 89 90 91 92 93 -36 (25) Sheet93 (2) Sheet702 Sheet708 (2) Sheet181 (5)

51 52 53 54 Computation of Unit Product Cost - Iguana Inc. Particulars Per Unit Cost 55 56 57 Direct Material (4*$3.00) Direct labor (0.5 * $13) Variable manufacturing overhead Fixed manufacturing overhead ($8400/4200) $12.00 $6.50 $0.50 $2.00 58 59 60 61 Unit Product Cost $21.00 62 63 64 65 66 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 -36 (25) Sheet93 (2) Sheet702 Sheet708 (2) Sheet181 (5)