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: The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,900, 30,000, 32,000, and 33,000 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 4 pounds of raw materials. The raw materials cost $2.50 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 $12 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 $69,000.

5. If 129,200 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

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

Explanation / Answer

PRODUCTION BUDGET JULY AUG Budgeted Sales Units 30,000 32,000 Add: Desired Ending Finished inventory 9,600 9,900 Total Needs 39,600 41,900 Less: Beginning Finished Inventory 9,000 9,600 Required Production in units 30,600 32,300 RAW MATERIAL PURCHASE BUDGET JULY AUG Budgeted Production 30,600 32,300 Raw material required per unit 4 4 Total Need for production 122,400 129,200 Add: Desired Ending Inventory 25,840 Total needs 148,240 Less: Beginning Inventory 24,480 Purchase Units 123,760 Cost price per unit 2.50 Budgeted Purchase in $ 309,400 Req 5: Raw materiala to be purchased in July month: 123,760 pounds Req 9: Ending Raw material inventory balance (25,840 pounds@$2.50): 64600

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