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 for its first four months of operations:

a. The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 8,200, 12,000, 14,000, and 15,000 units, respectively. All sales are on credit.

b. Forty percent of credit sales are collected in the month of the sale and 60% 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 5 pounds of raw materials. The raw materials cost $2.00 per pound.

e. Twenty percent of raw materials purchases are paid for in the month of purchase and 80% 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 $1.30. The fixed selling and administrative expense per month is $62,000.

Required: 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 71,000 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?

9. What is the estimated raw materials inventory balance (in dollars) 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?

12. What is the estimated finished goods inventory balance at the end of July, if the company always uses an estimated predetermined plantwide overhead rate of $8 per direct labor-hour?

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

Explanation / Answer

Morganton Company Budgetred Selling Price per unit $65 Months June July August September Sales 8200 12000 14000 15000 Total Sales Price $533,000 $780,000 $910,000 $975,000 Cash Collected from June Sales $213,200 $319,800 Cash Collected from July Sales $312,000 $468,000 Cash Collected from August Sales $364,000 $546,000 Cash collected from September Sales $390,000 Total Cash Collected $213,200 $631,800 $832,000 $936,000 Accounts Receivable $319,800 $468,000 $546,000 $585,000 1) Budgeted Sales for July $780,000 2) Expected Cash Collection for July $631,800 3) Accounts Receivable at the end of July $468,000 Months June July August September Sales 8200 12000 14000 15000 Ending Finshed goods Inventory 2400 2800 3000 Total Production 10600 12400 14200 12000 4) 12,400 Units produced for the month of July Raw Material Required Months June July August September Total Production 10600 12400 14200 12000 Raw Mateial Cost $ 106,000.00 $ 124,000.00 $ 142,000.00 $ 120,000.00 Ending Raw material Inventory $    12,400.00 $    14,200.00 $    12,000.00 Raw Material Purchsed $ 118,400.00 $ 125,800.00 $ 139,800.00 Amount Paid for june Purchase $    23,680.00 $    94,720.00 Amount Paid for july Purchase $    25,160.00 $ 100,640.00 Amount Paid for August Purchase $    27,960.00 $ 111,840.00 6) Estimated cost of Raw material Purchsed for themonth of july = $ 125,800.00 9) Estimated raw material Inventory balance for the month of july 14200 14) Varible selling and administerative exenses per unit= $1.30 Fixed selling and administerative expenses Per Month $62,000 Toal variable selling and administerative Expenses for July $15,600.00 Total Selling and administerative expenses $77,600.00 Direct Labour Hours required Labou wage rate $13 per hour Each unit required 2 direct labour hour Labour Cost for the month of July $ 322,400.00

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