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: Please show steps on how to get the answer.

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.

1.    What are the budgeted sales for July?

2.       What are the expected cash collections for July?

3.       What is the accounts receivable balance at the end of July?

4.       According to the production budget, how many units should be produced in July?

5.    If 81,250 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

6. What is the estimated cost of raw materials purchases for July?

7. In July what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases in June is $102,025.

8.    What is the estimated accounts payable balance at the end of July?

9. What is the estimated raw materials inventory balance at the end of July?

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

Working:

1 Budgeted Sales for July 840000 2 Expected cash collection for July 638400 3 Accounts Receivable at the end of July 504000 4 Units to be produced in July 14500 5 Raw material purchases in July 73375 pounds 6 Cost of raw material purchases in July 146750 7 Cash disbursement for raw material purchases in July 119915 8 Accounts payable balance at the end of July 88050 9 Estimated raw material balance atthe end of July 16250 10 Estimated direct labor cost for July 435000 11 Unit product cost 52 12 Finished goods ending inventory on July 31 - 4,000 x $52 208000 13 Cost of goods sold - 14,000 x $52 728000 14 Gross profit 112000 15 Estimated total selling and admn. Expenses 85000 16 Net operating income 27000

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