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 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. 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 20% 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 Twenty-percent of raw materials purchases are paid for in the month of purchase and 80% in the following month The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours The variable selling and administrative expense per unit sold is $1.30. The fixed selling and administrative expense per month is $62,000 (b) (c) (d) (e) (f) (g) What are the expected cash collections for July? Total cash collections$

Explanation / Answer

Solution 1:

Solution 2:

Sales revenue for July = 20000*$60 = $1,200,000

As 40% of sales collected in month of sale and 60% in following month, therefore accounts receivables balance at the end of July = $1,200,000 * 60% = $720,000

Computation of expected cash collection for July - Morganton Company Particulars Amount Cash received for June Sales (8200*$65*60%) $319,800.00 Cash received for July Sales (12000*$65*40%) $312,000.00 Expected cash collection for July $631,800.00

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