Morganton Company_Budgeting

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Description

Morganton
Company makes one product and it provided the following information to help
prepare the master budget for its four months of operation:

A. The budgeted selling price
per unit is $70. Budgeted unit sales for June, July, August and September are
8,400, 10,000, 12,000 and 13,000 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 20% of the following month’s unit sales.

D. 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.

E. Thirty percent of raw
materials purchases are paid for in the month of purchase and 70% in the
following month.

F. The direct labor wage rate
is $15 per hour. Each unit of finished goods requires two direct labor hours.

G. The variable and selling
administrative expense per unit sold is $1.80. The fixed selling and
administrative expense per month is $60,000.

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 61,000 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. If the cost of raw
materials purchases in June is $88,880, what are the estimated cash
disbursements for raw materials purchases in July?

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 the company always uses
an estimated predetermined plant wide overhead rate of $10 per direct labor
hour, what is the estimated unit product cost?

12. What is the estimated
finished goods inventory balance at the end of July, if the company always uses
an estimated predetermined plant wide overhead rate of $10 per direct labor
hour?

13. What is the estimated cost
of goods sold and gross margin for July, if the company always uses an
estimated predetermined plant wide overhead rate of $10 per direct labor hour?

14. What is the estimated
total selling and administrative expenses for July?

15. What is the estimated net
operating income for July, if the company always uses an estimated
predetermined plant wide overhead rate of $10 per direct labor-hour?

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