Question

Required information SB Problem PA8-1 to PA8-3 (The following information applies to the questions displayed below.) Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies: • Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: 340 380 March April May June July August 430 530 555 Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $8,400 ($700 per month) for expected production of 6,000 units for the year. Selling and administrative expenses are estimated at $750 per month plus $0.50 per unit sold. Iguana, Inc., had $14,800 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 direct materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Direct materials purchases for March 1 totaled $4,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $280 in depreciation. During April, Iguana plans to pay $4,300 for a piece of equipment. PA8-1 (Algo) Preparing Operating Budgets [LO 8-3a, b, c, d, e, f, g] Required: Compute the following for Iguana, Inc., for the second quarter (April, May, and June). April May June June 2nd Quarter Total 1. 3. 4. 5. 6. 7. Budgeted Sales Revenue Budgeted Production in Units Budgeted Cost of Direct Material Purchases Budgeted Direct Labor Cost Budgeted Manufacturing Overhead Budgeted Cost of Goods Sold Total Budgeted Selling and Administrative Expenses

Answer 1

1 Budgeted sales revenue 2 budgeted production in units 3 budgted cost of raw material 4 budgeted direct labor cost 5 budgeted manufacturing overhead 6 budged cost of goods sold 7 Total Budgeted selling and administrative budget april 9,500 400 | 3,368 2,400 may 10,750 470 3,880 2,820 june 13,250 520 4,172 3,120 804 8,268 1,015 2nd Qtr 33,500 1,390 11,420 8,340 2,378 20,904 2,920 5,928 940 6,708 965

Working Note: 1.sales budget Budgeted units sales x selling price per unit Total Budgeted Sales Quarter 1,340 April May 380 430 25 9,500 10,750 25 June 530 25 13,250 25 33,500 July June 530 202 222 2) Production budget Budgeted units sales Add: Desired Ending Inventory ( 40% of next month unit sale) Total Needs Less: Beginning Inventory Required production in units April May 380 430 172 552 642 152 172 400 470 732 202 525 520 April May 400 470 June 520 Quarter 1,390 4 4 5,560 630 3).direct material budget required production in units of finished goods x units of raw material needed per unit of finished goods units of raw material needed to meet production Add: Desired Ending Inventory ( 30% of next month production need) Total Needs Less: Beginning Inventory Required Inventory Purchase x cost per unit cost of raw material to be purchased 1,600 1,880 564_ 624)_ 2,164 2,504 564 1,684 1,940 2.00 2.00 3,368 3,880 2,080 630 2,710 624 2,086 2.00 4,172 6,190 480 5,710 2.00 11,420 1

4). direct labor budget April required production in units of finished goods | 400 x hours require per unit (30/60) 0.50 total hours required 200 x cost per hour 12 direct labor cost 2,400 May 470 0.50 235 12 2,820 June 520 0.50 260 12 3,120 Quarter 1,390 0.50 695 12 8,340 5.budgeted manufacturing overhead required production in units of finished goods 400 allocated variable overhead fixed overhead Total budgeted manufacturing overhead April May 470 0.20 0.20 80.00 94.00 700.00 700.00 780.00 794.00 June 520 0.20 104.00 700.00 804.00 Quarter 1,390 0.20 278.00 2,100.00 2,378.00 7). selling expense budget Budgeted units sales x variable expense per unit vairable selling expense add : fixed expense total april 380 0.50 190 750 940 may 430 0.50 215 750 965 june Quarter 530 1,340 0.50 0.50 265 | 670 750 2,250 1,015 2,920 cost of goods sold unit sold x unit cost** cost of goods sold April 380 15.60 5,928 May 430 15.60 6,708 June 530 15.60 8,268 Quarter 1,340 15.60 20,904 **calculation of unit cost direct material (42) direct labor (0.5*12) variable manufacturing overhead fixed manufacturing overhead (8400/6000) unit cost 8.00 6.00 0.20 1.40 15.60