Question

Required Information [The following information applies to the questions displayed below.) 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. 7. In July what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases In June Is $131,040, and 100,800 pounds of raw materials are needed to meet production in August. Total cash disbursements

Answer 1

Production Budget
	July	August	September
Budgeted Sales units	23000	25000	26000
Add : Desired Ending Inventory	5000	5200
Units Required	28000	30200	26000
Less : Beginning Inventory	4600	5000	5200
Production Required	23400	25200	20800
Raw Material Purchase Budget
	July	August
Production Required	23400	25200
Raw Material per unit (Pounds)	4	4
Raw Material Required for Production	93600	100800
Add : Desired Ending Inventory	10080
Units Required	103680	100800
Less : Beginning Inventory	9360
Production Required	94320	100800
Cost per pound	$              2.50
Raw Material Cost	$       235,800

7. Total cash disbursement for July = $131040 x 70% + 235800 x 30% = $162468

8. Accounts payable at end of July = $235800 x 70% = $165060

9. Raw Material Inventory at end of July = 10080 x $2.50 = $25200

15.

Income Statement (July)
Sales Revenue	$   1,380,000	=23000*60
Expenses
Direct Material	$       230,000	=23000*4*2.5
Direct Labor	$       598,000	=23000*2*13
Variable Manufacturing overhead	$       368,000	=23000*2*8
Variable selling expenses	$         41,400	=23000*1.8
Fixed selling expenses	$         62,000
Total Expenses	$   1,299,400
Net Operating Income	$         80,600