The following information applies to the questions displayed below.] Morganton C

Question

The following information applies to the questions displayed below.]

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 $65. Budgeted unit sales for June, July, August, and September are 9,900, 30,000, 32,000, and 33,000 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 20% 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.

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

The variable selling and administrative expense per unit sold is $1.90. The fixed selling and administrative expense per month is $69,000.

What are the expected cash collections for July, and what is the accounts receivable balance at the end of July?

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

Explanation / Answer

Month June   July August September Sales in Units                  9,900              30,000            32,000              33,000 Unit sales price                        65                      65                    65                      65 Amount of credit sales              643,500        1,950,000      2,080,000        2,145,000 Collection of cash for June Sale              257,400           386,100 Collection of cash for Jul Sale           780,000      1,170,000 Collection of cash for Aug Sale         832,000        1,248,000 Collection of cash for Sep Sale           858,000 Total Collection in Jul   $   1,166,100 Accounts receivable balance in Jul end=        1,170,000 (60% of Jun sale)

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