Question

CH8PT.EC

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

7.total disbursement for the July = 70% of June and 30% of July=$(131040*70%+(92000*30%)=$119328

8.account payable at the end of July =70% July purchase(230000*.70) =$161000

9.closing stock raw materials =(next month requirement *10%)=10800*10%=1080 units

10.total labour cost for the july =(23000*2*13)=$598000

11. computation of average cost

	raw materials (4*2.50)	10.00
	direct labour (13*2)	26.00
	variable manufacturing cost (8*2)	16.00
	variable selling and administrative cost	1.80
	Fixed selling and administrative cost (62000*4)/83200	2.98
	average cost	56.78

12.value of finished goods at the end of July = 25000*.20*54.98=$274903.85

13. cost o goods sold for the month of July =25000*.80*(10+26+16)= $1040000

Gross margin =slaes -the cost of goods sold =(25000*60*.8)-1040000=$160000

14. total selling and administrative cost for the month of July= (23000*1.80 +62000)=$103400

15. net operating income = (25000*.80(60-56.78)=$64400