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:

The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,800, 19,000, 21,000, and 22,000 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 5 pounds of raw materials. The raw materials cost $2.40 per pound.

The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor-hours.

The variable selling and administrative expense per unit sold is $2.00. The fixed selling and administrative expense per month is $69,000.

____________________________________________________________________________

3. What is the accounts receivable balance at the end of July?    ________

13. What is the estimated cost of goods sold in July _________

What is the estimated gross margin for July?    _________

15. What is the estimated net operating income for July? ________

a)

The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,800, 19,000, 21,000, and 22,000 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 5 pounds of raw materials. The raw materials cost $2.40 per pound.

(e) Twenty five-percent of raw materials purchases are paid for in the month of purchase and 75% 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 $2.00. The fixed selling and administrative expense per month is $69,000.

____________________________________________________________________________

3. What is the accounts receivable balance at the end of July?    ________

13. What is the estimated cost of goods sold in July _________

What is the estimated gross margin for July?    _________

15. What is the estimated net operating income for July? ________

Explanation / Answer

3) Account receivable balance at the end of july = 19000*70*70% = $931000

13) Estimated cost of goods sold = (2.4*5+12*2)*19000 = $684000

Estimated gross margin = (19000*70)-684000 = $646000

15) Estimated net operating income = 646000-(19000*2+69000) = $539000

Note : Overhead details not given

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