Required information The Foundational 15 [LO8-2, LO8-3, LO8-4, Lo8-5, LO8-7, LO8

Question

Required information The Foundational 15 [LO8-2, LO8-3, LO8-4, Lo8-5, LO8-7, LO8-9, LO8-10] The following information applies to the questions displayed below. Morganton Company makes one product and it provided the following information to help prepare the master budget a. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,500, 26,000, 28,000, and 29,000 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 25% of the following month's unit sales. d. The ending raw materials inventory equals 15% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.40 per pound e. Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month. f. The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $65,000.

Explanation / Answer

Part (3)

Calculation of accounts receivable balance at the end of July-

Total sales in July - 26,000 units* $60 per unit = $ 1,560,000

40% to be collected in July = $1,560,000*40% = $ 624,000

60% to be collected in August = $ 1,560,000*60% = $ 936,000

Hence, accounts receivable balance at the end of July = $ 936,000

Part (4)

Calculation of units should be produced in July-

Finished goods inventory for the month of June = 26,000*25% = 6,500 Units

Finished goods inventory for the month of July = 28,000*25% = 7,000 Units

Sales in the month of July = 26,000 Units

Units should be produced = Sales of July+ Closing Inventory- Opening Inventory

26,000+7000-6500

= 26,500 Units

Part (9)

Calculation of Raw Material Inventory Balance at the end of July-

Opening stock of Finished goods for August = 7,000 Units

Sales in August = 28,000 Units

Closing stock of Finished goods for August = 29,000*25% = 7,250 Units

Units to be produced in August = 28,000+7,250-7,000

= 28,250 Units

Raw Material Required = 28,250 Units* 4 Pounds per unit = 113,000 Pounds

Raw Material Inventory balance at the end of July = 113,000 Pounds*15% = 16,950 Pounds

Part (12)

Finished goods inventory balance at the end of July = 7,000 units (Calculated in Part 4 above)

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