Morganton Company makes one product and it provided the following information to
ID: 2553574 • Letter: M
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 $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.
-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 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.
-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 $1.50. The fixed selling and administrative expense per month is $65,000.
12. What is the estimated finished goods inventory balance at the end of July?
13. What is the estimated cost of goods sold for July? What is the 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
Answer
June
July
August
September
Budgeted Sales [units]
9500
26000
28000
29000
Expected ending inventory [25% of following month's sale]
6500
7000
7250
0
Total Requirement
16000
33000
35250
29000
(-) Beginning Inventory
0
6500
7000
7250
Units to be produced
16000
26500
28250
21750
Answer: Estimated Finished Goods Inventory balance for July is 7000 units as per working above.
Working
Material cost per unit [$2.4 per pound x 4 pounds]
$9.6
Labor cost per unit [$12 per DLH x 2DLH]
$24
Total manufacturing cost
$33.6
Answer: Cost of Goods Sold for July
Units sold
Manufacturing cost per unit
Cost of Goods Sold
26000
$33.6
$873600
July Sales Revenue
$1560000
(-) july Cost of Goods Sold
$873600
Gross Margin for July
$686400
Units Sold
26000
Selling & administrative cost per unit
$1.5
Variable S & A expense
$39000
Fixed S & A expense
$65000
Total selling & administrative expenses for July
$104000
Gross Margin for July
$686400
Less:
Total selling & administrative expenses for July
$104000
Net Operating Income for July
$582400
June
July
August
September
Budgeted Sales [units]
9500
26000
28000
29000
Expected ending inventory [25% of following month's sale]
6500
7000
7250
0
Total Requirement
16000
33000
35250
29000
(-) Beginning Inventory
0
6500
7000
7250
Units to be produced
16000
26500
28250
21750
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