Morganton Company makes one product and it provided the following information to
ID: 2398210 • Letter: M
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 $60. Budgeted unit sales for June, July, August, and September are 8,300, 14,000, 16,000, and 17,000 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 25% of the following month’s unit sales.
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 $2.00 per pound.
Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month.
The direct labor wage rate is $15 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 $64,000.
10. What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?
11. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)
12. What is the estimated finished goods inventory balance at the end of July?
13. What is the estimated cost of goods sold and gross margin for July?
14. What is the estimated total selling and administrative expense for July?
15. What is the estimated net operating income for July?
Explanation / Answer
Morganton Company Sales Budget Months June July August September Budgeted unit sales 8300 14000 16000 17000 Selling Price Per unit $ 60.00 $ 60.00 $ 60.00 $ 60.00 Total sales $ 4,98,000.00 $ 8,40,000.00 $ 9,60,000.00 $ 10,20,000.00 Schedule of expected cash collections June July August September June Sales($40% of $498000) in June,(60% of $498000)in July $ 1,99,200.00 $ 2,98,800.00 July sales(40% of $840000) in July,(60% of $840000) in August $ 3,36,000.00 $ 5,04,000.00 August Sales(40% of $960000) in August,(60% of $960000) in septemebr $ 3,84,000.00 $ 5,76,000.00 Septemebr Sales(40% of $1020000) in Septemebr $ 4,08,000.00 Total Cash collections $ 1,99,200.00 $ 6,34,800.00 $ 8,88,000.00 $ 9,84,000.00 Budgeted Unit Sales 14000 12) Ending Inventory for July=(August Sales *25%)=(16000*25%) 4000 13) Unit Sales 14000 Unit Produt cost Quantity Required per unit Cost Total Direct Material 5 $ 2.00 $ 10.00 Direct Labor 2 $ 15.00 $ 30.00 Manufacturing Overhead 2 $ 6.00 $ 12.00 $ 52.00 Unit Sales 14000 Total Product Cost $ 52.00 Selling Price $ 60.00 Gross Profit($60-$52)*14000 $ 1,12,000.00 14) Estimated Selling & Administerative Expenses Budgeted Unit Sales for July 14000 Variable Selling & Administrative Expenses per unit $ 1.50 Total Variable Expenses(14000*$1.50) $ 21,000.00 Fixed Selling & Administerative Expenses $ 64,000.00 Total Selling & Administertiave Expenses($21000+$64000) $ 85,000.00 15) Net Operating Income for July Gross Profit $ 1,12,000.00 Less: Selling & Administerative Expenses $ 85,000.00 Net Operating Income($112000-$85000) $ 27,000.00
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