Morganton Company makes one product and it provided the following information to
ID: 2482189 • 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 $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.
7.
If the cost of raw material purchases in June is $93,040, what are the estimated cash disbursements for raw materials purchases in July
8.
What is the estimated accounts payable balance at the end of July?
11.
If the company always uses an estimated predetermined plantwide overhead rate of $8 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, if the company always uses an estimated predetermined plantwide overhead rate of $8 per direct labor-hour?
13.
What is the estimated cost of goods sold and gross margin for 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?
15.
What is the estimated net operating income for July, if the company always uses an estimated predetermined plantwide overhead rate of $8 per direct labor-hour?
Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operations:
Explanation / Answer
Cash Collection from customers: Jun Jul Aug Sept Budgeted sales in units 8,200 12,000 14,000 $ 15,000 Sales (@ $65 per unit) $ 533,000 $ 780,000 $ 910,000 $ 975,000 Cash collected 40% in same month $ 213,200 $ 312,000 $ 364,000 $ 390,000 Cash collected 60% in following month of sale $ 319,800 $ 468,000 $ 546,000 Cash collected $ 631,800 $ 832,000 $ 936,000 Calculation of finished inventory: Jun Jul Aug Sept Budgeted sales in units 8,200 12,000 14,000 $ 15,000 Finished inventory (20% of sale units of following month) 2,400 2,800 3,000 - Beginning Inventory - 2,400 2,800 3,000 The calculation of raw material required for units sold: (1 unit requires 5 pounds of raw material) Jun Jul Aug Sept Budgeted sales in units 8,200 12,000 14,000 $ 15,000 Raw material required for production of units sold (5pnds/unit) 41,000 60,000 70,000 75,000 Cost of raw material used(@ $2 per pound) $ 82,000 $ 120,000 $ 140,000 $ 150,000 The calculation of raw material inventory ending: Jun Jul Aug Sept Raw material req for production 41,000 60,000 70,000 $ 75,000 Finished raw material inventory 6,000 7,000 7,500 - The calculation of raw material purchases for the month Jul and Aug is as under: Jul Aug Raw material used 60,000 70,000 Add: Finished inventory 7,000 7,500 Total raw material available 67,000 77,500 Less: Beginning Inventory (6,000) (7,000) Raw material purchased 61,000 70,500 Cost of raw material purchased @ $2 per pound $ 122,000 $ 141,000 The calculation of direct labor hours and direct labor cost for the month of July and Aug. Jul Aug Finished goods 12,000 14,000 Direct labor hours (2 hrs/unit) 24,000 28,000 Direct labor cost @ $13/hr $ 312,000 $ 364,000 The calculation of selling and administrative expense per units sold is $1.30. Jul Aug Finished goods 12,000 14,000 Variable selling and administrative exp. (@ $1.30/unit) $ 15,600 $ 18,200 7. The cash disbursement for raw materials purchases in the month of July is as under: Payment to suppliers: June Jul Aug Purchases made $ 93,040 $ 122,000 $ 141,000 Payment in same month 20% $ 24,400 $ 28,200 Payment in following month 80% $ 74,432 $ 97,600 Cash disbursement for raw material purchases $ 98,832 $ 125,800 8. The Accounts payable balance at the end of the month of July is 80% of purchases of the month of July. The purchases of July=$122,000 Accounts payable at the end of the month of July=$122,000*80% '=$97,600 11. The estimated unit product cost is calculated as under: Unit cost Direct material (5Pnd*$2) $10 Direct labor(2L.Hrs @ $13/hr) $26 Overhead cost(2hrs @$8/hr) $16 Total product cost $52 12. The fininshed goods inventory at the end of the month of July is $2,800units The finished goods inventory balance at the end of the month of July =2,800 units @ $52 per unit '=$145,600 13. The estimated cost of goods sold and gross profit for the month of July is calculated as under: Per unit Amount units sold 12,000 Direct material (5Pnd*$2) $ 10.00 $ 120,000 Direct labor(2L.Hrs @ $13/hr) $ 26.00 $ 312,000 Overhead cost(2hrs @$8/hr) $ 16.00 $ 192,000 Selling and administrative exp $ 1.30 $ 15,600 Total cost of sales $ 53.30 $ 639,600 Fixed expenses($62,000/14,800)*12,000 $ 50,270 Total cost of goods sold $ 689,870 Gross Profit=Sales-Cost of goods sold-Fixed expenses Units sold 12,000 units Sales @ $65 $ 780,000 Less: Cost of goods sold $ (689,870) Gross profit $ 90,130 14. the total selling and administrative expenses for the month of July is calculated as under: Variable selling and administrative exp. @ $1.3/unit $ 15,600 Fixed selling and administrative exp. $ 62,000 Total selling and adminstrative exp $ 77,600 15. The net operating income for the month of July is calculated as under: Sales $ 780,000 Less: cost of goods manufactured @ $52 $ (624,000) Selling and adminstrative exp Variable selling and administrative exp $ (15,600) Fixed selling and administrative exp $ (62,000) Net income $ 78,400
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