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 first four months of operations:

The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,500, 16,000, 18,000, and 19,000 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 $2.00 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 $1.70. The fixed selling and administrative expense per month is $66,000.

If the cost of raw material purchases in June is $106,400, what are the estimated cash disbursements for raw materials purchases in 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

Particulars June July August Sep Budgeted units sales(A) 8500 16000 18000 19000 Ending Finished Goods inventory(B) 3200 3600 3800 Befinning Finished goods inventory(C) 3200 3600 Finished goods production(D=A+B-C) 16400 18200 Raw material required for each unit of finished good 5 Total raw material production need (E) 82000 (16400*5) Ending raw material inventory(F) 1640 1820 (18200*0.10) Beginning raw material inventory(G) 1640 Raw material purchase(H =E+F-G) 82180 Cost of raw material per period 2 Cost of raw material purchase 106400 164360 Cash Disbursements for raw material purchase 30% paid in the same month of purchase 31920 49308 (106400*0.30) (164360*0.30) 70% paid in the next month of purchase 74480 (106400*0.70) Total cash disbursements of raw material 123788

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