Question

CH8PTEC

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. f. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $62,000. Foundational 8-1 Required: 1. What are the budgeted sales for July? Budgeted sales

Answer 1

1)	June	July	August	September
Selling price per unit (a)	$60	$60	$60	$60
Sales in units (b)	9,200	23,000	25,000	26,000
Budgeted Sales (a*b/)	$552,000	$1,380,000	$1,500,000	$1,560,000
Therefore, budgeted sales for July is $1,380,000.
2)	June	July	August	September
Cash collections from credit sales:
June Sales ($552,000*30/100); ($552,000*70/100)	$165,600	$386,400
July Sales ($1,380,000*30/100); ($1,380,000*70/100)		$414,000	$966,000
August sales ($1,500,000*30/100); ($1,500,000*70/100)			$450,000	$1,050,000
Total Cash Collections in July		$800,400
3)
Accounts Receivable at the end of July is $966,000 as calculated above.
4)	June	July	August	September
Sales in units	9,200	23,000	25,000	26,000
Add: Ending inventory (23,000*20/100); (25,000*20/100); (26,000*20/100)	4,600	5,000	5,200
Less: Beginning inventory (last month's ending inventory will be beginning inventory in current month)		4,600	5,000	5,200
Required Production in units	13,800	23,400	25,200	20,800
Therefore, required production in units for July is 23,400 units.
5)	June	July	August	September
Required Production in units (a)	13,800	23,400	25,200	20,800
Pounds of raw materials required in August (b)			100,800
Raw materials in pounds per unit (c = b/a)			4
Pounds of raw materials required in July (c * a)		93,600
Therefore, raw materials in pounds required in July 93,600 pounds.
6)	June	July	August	September
Pounds of raw materials required in July (a)		93,600
Cost per pound of raw materials (b)		$2.50
Total cost of raw materials to be purchased (a*b)		$234,000
Therefore, cost of raw materials to be purchased is $234,000.