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 $70. Budgeted unit sales for June, July, August, and September are 9,400, 25,000, 27,000, and 28,000 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. 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 $15 per hour. Each unit of finished goods requires two direct labor-hours.

g. The variable selling and administrative expense per unit sold is $2.00. The fixed selling and administrative expense per month is $64,000.

Q1.1 - What are the budgeted sales for July?

Q1.2 - According to the production budget, how many units should be produced in July?

Q1.3 - 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?

Q1.4 - What is the estimated total selling and administrative expense for July?

Q1.5 - If the company always uses an estimated predetermined plantwide overhead rate of $10 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)

Explanation / Answer

Answer 1.1. Sales Budget July Units Sold                25,000 SP per Unit                        70 Budgeted Sales (In $)          1,750,000 Answer 1.2. Merchandise Production Budget July Sales In units                25,000 Add: Ending Inventory - 20% X 27,000 Units                  5,400 Total Needs                30,400 Less: Beginning Inventory - 20% X 25,000 Units                (5,000) Required Units Produced                25,400 Answer 1.3. Direct Labor Budget July Required Units Produced                25,400 Direct Labor Hour per Unit                     2.00 Total Direct Labor Hours Required                50,800 Cost per Direct Labor Hour                        15 Direct Labor Cost              762,000 Answer 1.4. Selling & Administrative Expenses - July Variable - 25,000 Units X $2          50,000.00 Fixed          64,000.00 Total Selling & Administrative Expenses        114,000.00 Answer 1.5. Direct Material - 4 Pounds X $2.50                  10.00 Direct Labor - 2 Hrs X $15                  30.00 Overhead Applied - 2 DLH X $10                  20.00 Estimated Unit Product Cost                  60.00

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