Morganton Company makes one product and it provided the following information to

Question

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

The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,300, 14,000, 16,000, and 17,000 units, respectively. All sales are on credit.

Forty percent of credit sales are collected in the month of the sale and 60% in the following month.

The ending finished goods inventory equals 25% of the following month’s unit sales.

The ending raw materials inventory equals 10% 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.

Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month.

The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.

The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $64,000.

5. If 81,250 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

6. 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 $102,025.

8. What is the estimated accounts payable balance at the end of July?

9. What is the estimated raw materials inventory balance at the end of July?

10. What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?

11. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)

12. What is the estimated finished goods inventory balance at the end of July?

13. What is the estimated cost of goods sold and gross margin for July?

14. What is the estimated total selling and administrative expense for July?

15. What is the estimated net operating income for July?

Explanation / Answer

Solution 5:

Solution 6:

Estimated cost of raw materials purchases for July = Budgeted purchase in pound * cost per pound

= 73375 * $2 = $146,750

Solution 7:

Total estimated cash disbursements for raw materials purchases in July = Budgeted purchase for june * 60% + Budgeted purchase for july * 40%

= $102,025 * 60% + $146,750 * 40%

= $119,915

Solution 8:

Estimated accounts payable balance at the end of july = Budgeted purchase of raw material for july * 60%

= $146,750 * 60% = $88,050

Soluiton 9:

Estimated raw materials inventory balance at the end of July = 81250 * 10% = 8125 pound = 8125 * $2 = $16,250

Note: I have answered more than required parts of the question as per chegg policy, kindly post separate question for answer of remaining parts.

Raw material purchase budget (July) Particulars Amount Budgeted sales units for july 14000 Add: Desired ending inventory of FG 4000 Less: Beginning inventory of FG 3500 Production budget for July 14500 Raw material requirement per unit (In pound) 5 Total raw material requirement for july 72500 Add: Desired ending inventory of Raw material 8125 Less: Beginning inventory of raw material 7250 Budgeted purchase of raw material in july (In pound) 73375

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