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:

The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,300, 24,000, 26,000, and 27,000 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 30% of the following month’s unit sales.

The ending raw materials inventory equals 20% 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.

Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.

The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours.

The variable selling and administrative expense per unit sold is $1.90. The fixed selling and administrative expense per month is $63,000.

A. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $9 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)

B. What is the estimated finished goods inventory balance at the end of July?

C. What is the estimated cost of goods sold and gross margin for July?

D. What is the estimated total selling and administrative expense for July?

E. What is the estimated net operating income for July?

Explanation / Answer

B)  estimated finished goods inventory balance at the end of July = 7800 units

C. estimated cost of goods sold in July = $1344000 and gross margin for July = $216000

D. estimated total selling and administrative expense for July = $108600

E. estimated net operating income for July = $107400

Working Notes:

For the month of July

Particulars June July August September Units sold 9300 24000 26000 27000 Ending Inventory 7200 7800 8100 0 Total Requirement 16500 31800 34100 Less: beginning Inventory 7200 7800 Units Produced 24600 26300 Raw Material required (lbs) 98400 105200 (@ 4lb per unit) Ending Inventory of raw material 19680 21040 Total Requirement 119440 Less: Beginning Inventory 19680 Raw material Purchased (pounds) 99760 Purchase price per pound ($) 2.5 Total Purchase price ($) 249400

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