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 $65. Budgeted unit sales for June, July, August, and September are 8,400, 15,000, 17,000, and 18,000 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 30% of the following month's unit sales. d. The ending raw materials inventory equals 20% of the following month's raw materials production needs. Each unit of finished goods requires 5 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 $12 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.60. The fixed selling and administrative expense per month is $65,000. 9. If 86,500 pounds of raw materials are needed to meet production in August, what is the estimated raw materials inventory balance at the end of July?

Answer 1

The ending raw materials inventory = 20% of the following month's raw materials production needs.

Raw materials needed to meet production in August = 86,500 pounds

Therefore,

Ending raw materials inventory for July = 86,500 x 20% = 17,300 pounds

Cost of raw materials = $2.50 per pound

Thus,

Estimated raw materials inventory balance at the end of July = 17,300 x $2.50 = $43,250