When you answer this question....Can you explain how you get the Desired Ending
ID: 2651153 • Letter: W
Question
When you answer this question....Can you explain how you get the Desired Ending Raw Materials Inventory and the Beginning Raw Materials Inventory? I am so lost when it comes to that. Please show all calculations. Thank you!!
Morganton Company makes one product and it provided the following information to help prepare the master budget for its four months of operations:
The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,200, 23,000, 25,000, and 26,000 units, respectively. All sales are on credit.
The ending raw materials inventory equals 10% 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.
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 $1.80. The fixed selling and administrative expense per month is $62,000.
(a)The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,200, 23,000, 25,000, and 26,000 units, respectively. All sales are on credit.
(b) Thirty-percent of credit sales are collected in the month of the sale and 70% 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 4 pounds of raw materials. The raw materials cost $2.50 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 $1.80. The fixed selling and administrative expense per month is $62,000.
Explanation / Answer
Morganton Company
We know that
Sales + Ending Inventory= Beginning Inventory + Production of units
Production = Sales + Ending Inventory- Beginning Inventory
Now we calculate the production of units
Particulars
June
July
Aug
Sep
Sales Units
9200
23,000
25,000
26,000
Ending Inventor ( 20 % of next month sales)
4600 (23000x 0.2)
5,000 ( 25000 x0.2)
52,00 (26000 x 0.2)
Beginning Inventory ( Ending inventory of last month)
4600
5000
5200
Production
-
23,400
25,200
-
Raw Material Consumption
93,600 (23400 x4)
100,800 ( 25200 x4)
Calculation of Purchase of Raw Material
We know that
Raw Material consumed + Ending raw material= Beginning raw material + Purchase
Purchase= Consumed + Ending – Beginning
Particular
June
July
Aug
Sep
Raw Material Consumed
93.600
100,800
Ending Raw Material ( Next Month Consumption x 10 %)
9360 (93600 x0.1)
10,080 (100800 x0.1)
Beginning Raw Material ( Ending of Last month)
9360
10,080
Raw Material Purchase
94,320
Raw Material to be purchased in July= 94,320 pounds
Particulars
June
July
Aug
Sep
Sales Units
9200
23,000
25,000
26,000
Ending Inventor ( 20 % of next month sales)
4600 (23000x 0.2)
5,000 ( 25000 x0.2)
52,00 (26000 x 0.2)
Beginning Inventory ( Ending inventory of last month)
4600
5000
5200
Production
-
23,400
25,200
-
Raw Material Consumption
93,600 (23400 x4)
100,800 ( 25200 x4)
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