The Foundational 15 [LO8-2, LO8-3, LO8-4, LO8-5, LO8-7, L08-9, LO8-10] The follo

Question

The Foundational 15 [LO8-2, LO8-3, LO8-4, LO8-5, LO8-7, L08-9, LO8-10] 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: a. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,500, 26,000, 28,000, and 29,000 units, respectively. All sales are on credit. b. Forty percent of credit sales are collected in the month of the sale and 60% in the following month. C. The ending finished goods inventory equals 25% of the following month's unit sales. d. The ending raw materials inventory equals 15% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.40 per pound. e. Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month. f. The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $65,000.

Explanation / Answer

UNIT PRODUCT COST

ENDING FINISHED GOOD INVENTORY FOR JULY MONTH = 7000 UNITS

(REF TABLE 1)

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ESTIMATED SELLING AND ADMINISTRATIVE EXPENSES FOR MONTH OF JULY =$ 104000

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VARIABLE SELLING AND ADMINISTRATIVE EXPENSES( 26000 x 1.5) = $ 39000

FIXED SELLING AND ADMINISTRATIVE EXPENSES = $ 65000

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TABLE 1 -CALCULATION OF ENDING INVENTORY OF FINISHED GOODS

TABLE 2-CALCULATION OF UNITS PRODUCED

PRODUCTION OF FINISHED GOODS

(B+C-A)

TABLE 3-CALCULATION OF RAW MATERIAL REQUIRED

TABLE 4 CALCULATION OF PAYMENT MADE FOR RAW MATERIAL PURCHASES

TABLE 5 MATERIAL PURCAHSE REQUIRED FOR MONTH OF JULY

(in $) a RAW MATERIAL COST 4 pound p.u X $2.4/pound 9.60 b LABOR WAGES 2 hr p.u X $12/hr 24.00 c VARIABLE MFG. OH 2 hr p.u X $8/hr 16.00 UNIT PRODUCT COST TOTAL(a+b+c) 49.60

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