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.

( Helpful notes: Assumed cost of raw materials purchases in june is $140,352. No fixed manufacturing overhead, and assumed variable manufacturing overhead is $10 per direct labor-hour)

1. What is the estimated cost of raw materials purchases for july?

2. What is the estimated aw materials inventory balance at the end of july?

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

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

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

Morganton Company makes one product and it provided the following information to help prepare the master budget for its four months of operations:

Explanation / Answer

PRODUCTION BUDGET

1.

Estimated cost of raw materials purchases for july = Raw materials production needs in July + 10% of raw materials production needs in August - 10% of raw materials production needs in July

= (19,400*5) + (21,200*5*10%) - (19,400*5*10%)

= 97,000 + 10,600 - 9,700

= 97,900

2.

Estimated raw materials inventory balance at the end of july = 10% of August month production needs

= 21,200*5*10%

= 10,600

3.

The estimated total selling and administrative expense for July = Variable + Fixed

= (19,000*$2) + $69,000

= $107,000

4.

Estimated finished goods inventory balance at the end of July = 20% of August sales

= 21,000*20%

= 4,200

5.

Estimated total selling and administrative expense for July = Variable + Fixed

= (19,000*$2) + $69,000

= $107,000

July August Sales in units 19,000 21,000 Ending inventory in units 4,200 (21,000*20%) 4,400 (22,000*20%) Less : Opening inventory in units 3,800 (19,000*20%) 4,200 (21,000*20%) Production in units 19,400 21,200

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