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 $65. Budgeted unit sales for June, July, August, and September are 8,700, 18,000, 20,000, and 21,000 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 30% of the following month's unit sales. The ending raw materials inventory equals 20% 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 $1.90. The fixed selling and administrative expense per month is $68,000. What is the estimated raw materials inventory balance at the end of July?

Explanation / Answer

Working Working Working Production budget June July Aug September Finished Goods Sales unit 8700.0 18000.0 20000.0 21000 Closing Inventory 30% of next month sales S*.3 5400.0 6000.0 6300.0 16 Total Finised Googd 14100.0 24000.0 26300.0 21016 Less: Beginning Inventory 2610.0 5400.0 6000.0 6300 Sticks to be produced 11490.0 18600.0 20300.0 14716 Units to be produced 11490.0 18600.0 20300.0 14716 working Working Raw material Budget June July Aug September Units to be produced 11490 18600 20300 14716 Pounds of Raw material 5 5 5 5 Total Pounds of Raw material Needed 57450 93000 101500 73580 Closing Inventory 20% of next month raw material production 18600 20300 14716 Total raw material required 76050 113300 116216 Less: Beginning Inventory 11490 18600 20300 Raw Material required 64560 94700 95916 Raw material cost per pound 2 2 2 Budgeted cost of Raw material 129120 189400 191832 raw Material Inventory balance 20300*2 $40600 Ans

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