Question

Morganton Company makes one product and it provided the following information to help prepare the master budget:

1. The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 8,700, 18,000, 20,000, and 21,000 units, respectively. All sales are on credit.
2. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
3. The ending finished goods inventory equals 30% of the following month’s unit sales.
4. 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 $2.00 per pound.
5. Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month.
6. The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.
7. The variable selling and administrative expense per unit sold is $1.90. The fixed selling and administrative expense per month is $68,000

questions:

1. What are the budgeted sales for July?

2. What are the expected cash collections for July?

3. What is the accounts receivable balance at the end of July?

4. According to the production budget, how many units should be produced in July?

5. If 101,500 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

6. If 101,500 pounds of raw materials are needed to meet production in August, what is the estimated cost of raw materials purchases for July?

7. In July what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases in June is $129,120; and 101,500 pounds of raw materials are needed to meet production in August.

8. If 101,500 pounds of raw materials are needed to meet production in August, what is the estimated accounts payable balance at the end of July?

Answer 1

1. Budgeted sales for July = 18000 units x $65 = $1170000

2. Expected cash collections for July: $807300

	July
Collection of sales of:
July (40% x $1170000)	468000
June (60% x 8700 x $65)	339300
Total collections $	807300

3. Accounts receivable balance at the end of July = 60% x $1170000 = $702000

4. Units to be produced in July: 18600

	July
Budgeted unit sales	18000
Add desired ending finished goods inventory (30% x 20000)	6000
Total required	24000
Less beginning finished goods inventory (30% x 18000)	5400
Units to be produced	18600

Per Chegg guidelines the first 4 parts have been answered. Please post the remaining separately. Thank you.