Question

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.

Answer 1

9) Production Unit in August = 25000+(26000*20%)-5000 = 25200 Units

Raw material inventory balance at end of July = 25200*4*10%*2.5 = $25200

10) Unit product cost = (4*2.5+13*2+8*2) = 52

11) Finished goods inventory = 25000*20%*52 = 260000

12) Cost of goods sold = 23000*52 = 1196000

Gross margin = 23000*8 = 184000

13) Total selling and administrative expense = (23000*1.8+62000) = 103400

14) Net operating income = 184000-103400 = 80600