Morganton Company makes one product and it provided the following information to
ID: 2464090 • Letter: M
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?
What is the estimated accounts payable balance at the end of July?
What is the estimated raw materials inventory balance (in dollars) at the end of July?
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?
[The following information applies to the questions displayed below.]Explanation / Answer
Morganton Company All Amounts in $ 7. The estimated cash disbursements for raw material purchases in July will be 70% of $ 106,400 = 74480 $ This will be increased by 30% of the July purchase value of $ 162,000 = $ 48,600. Hence, the total cash disbursements against raw material purchases in July will be 123080 $ 8. The accounts payable balance at the end of July will be 70% of $ 162,000 = $ 113,400. July Purchases Opening RM Inventory 8000 July Production 80000 Closing RM Inventory 9000 July Purchases 81000 July Purchase Value 162000 9. The estimated RM Inventory balance at the end of July is 9,000 pounds X $ 2 = $ 18,000. 10. The Direct labor cost for July is 16,000 units X 2 direct labor hours X $ 13 per hour = 416000 $
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