Morganton Company makes one product and it provided the following information to
ID: 2729211 • 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:
The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,900, 20,000, 22,000, and 23,000 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 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 $2.50 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 $13 per hour. Each unit of finished goods requires two direct labor-hours.
The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $70,000.
What is the estimated total selling and administrative expense for July?
a.The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,900, 20,000, 22,000, and 23,000 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 $2.50 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 $1.50. The fixed selling and administrative expense per month is $70,000.
What is the estimated total selling and administrative expense for July?
Explanation / Answer
Particulars June July August September Units 8900 20000 22000 23000 Selling Price 60 60 60 60 Total Sales 534000 1200000 1320000 1380000 40% Collected in the month of sale 213600 480000 528000 552000 60% collected in the following month 0 320400 720000 792000 Ending finished goods inventory 4000 4400 4600 0 Sales 8900 20000 22000 23000 Closing Inventory 4000 4400 4600 0 Opening Inventory 0 4000 4400 4600 Units Produced 12900 20400 22200 18400 Raw Materials Required 64500 102000 111000 92000 Ending Raw Materials Inventory 10200 11100 9200 0 Opening Raw materials Inventory 0 10200 11100 9200 Raw Materials Purchased 74700 102900 109100 82800 Raw Materials Cost 2.5 2.5 2.5 2.5 Raw Materials Purchase Cost 186750 257250 272750 207000 30% Paid in the month of purchase 56025 77175 81825 62100 70% Paid in the following month 0 130725 180075 190925 Direct labour hours 25800 40800 44400 36800 Wage rate 13 13 13 13 Total Labour Cost 335400 530400 577200 478400 Variable Selling and admin expenses 13350 30000 33000 34500 Fixed selling and admin expenses 70000 70000 70000 70000
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