Morganton Company makes one product and it provided the following information to
ID: 2464089 • Letter: M
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 8,500, 16,000, 18,000, and 19,000 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. 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 $13 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $66,000
What is the accounts receivable balance at the end of July?
According to the production budget, how many units should be produced in July?
If 91,000 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in 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 91,000 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?Explanation / Answer
Solution:
3)
The Accounts Receivable balance at the end of July Month = 60% of July Month’s Credit Sales = $672,000
Collection schedule is as follows --- 40% of Credit Sales are collected in the month of the sale and 60% credit sales are collected in the following month of sale. In other words, 60% of credit sales are became outstanding of that month.
Working
June
July
August
September
Budgeted Sales Unit
8,500
16,000
18,000
19,000
Unit Selling Price
$70
$70
$70
$70
Budgeted Sales in dollars
$595,000
$1,120,000
$1,260,000
$1,330,000
Collection from Credit Sales
40% of credit sales are collected in the month of the sale
$238,000
$448,000
$504,000
$532,000
60% are collected in the following month of sale
$357,000
$672,000
$756,000
Total Collection
$238,000
$805,000
$1,176,000
$1,288,000
4)
According to the production budget, how many units should be produced in July ? ---- July month’s budgeted production units = 16,400 Units
Calculation of Production Budget Units
June
July
August
September
Budgeted Sales Unit
8,500
16,000
18,000
19,000
Add: Ending Inventory of Finished Goods
(20% of following months sale)
3,200
3,600
3,800
0
Less: Beginning Inventory of Finished Goods (Ending Inventory of last month)
(3,200)
(3,600)
(3,800)
Budgeted Production Units
11,700
16,400
18,200
15,200
5)
If 91,000 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July? ----- Raw Materials should be purchased in July = 82,900 Pounds
Working:
June
July
August
September
Budgeted Production Units
11,700
16,400
18,200
15,200
Raw Material Requirement Per Budgeted Production Unit (in Pounds)
5
5
Total Raw Material Requirement in Pounds for Budgeted Production Units
82,000
91,000
Add: Ending Inventory of Raw Material (10% of the following month’s raw materials production needs)
8,200
9,100
0
0
Less: Beginning Inventory of Raw Material (Ending Inventory of Last Month)
(8,200)
Raw Material To be Purchased
82,900
6) What is the estimated cost of raw materials purchases for July?
Estimated cost of raw materials purchases for July = Raw Material Purchase Requirement for July month x Raw Material Price Per Pound = 82,900 Pounds x $2 per pound = $165,800
June
July
August
September
Budgeted Sales Unit
8,500
16,000
18,000
19,000
Unit Selling Price
$70
$70
$70
$70
Budgeted Sales in dollars
$595,000
$1,120,000
$1,260,000
$1,330,000
Collection from Credit Sales
40% of credit sales are collected in the month of the sale
$238,000
$448,000
$504,000
$532,000
60% are collected in the following month of sale
$357,000
$672,000
$756,000
Total Collection
$238,000
$805,000
$1,176,000
$1,288,000
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