Required information [The following information applies to the questions displayed below.] Morganton Company makes one p…
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Question “Required information [The following information applies to the questions displayed below.] Morganton Company makes one p…”
Required information
[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:
- The budgeted selling price per unit is $70. Budgeted unit sales
for June, July, August, and September are 8,800, 19,000, 21,000,
and 22,000 units, respectively. All sales are on credit. - Thirty percent of credit sales are collected in the month of
the sale and 70% in the following month. - The ending finished goods inventory equals 20% 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 $2.40
per pound. - Twenty five percent of raw materials purchases are paid for in
the month of purchase and 75% 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 $2.00. The fixed selling and administrative expense per month is
$69,000.
Required:
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 106,000 pounds of raw materials are needed to meet
production in August, how many pounds of raw materials should be
purchased in July?
6. If 106,000 pounds of raw materials are needed to meet
production in August, 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 $140,352.
8. If 106,000 pounds of raw materials are needed to meet
production in August, what is the estimated accounts payable
balance at the end of July?
9. If 106,000 pounds of raw materials are needed to meet
production in August, 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 $10 per direct
labor-hour, what is the estimated unit product cost? (Round
your answer to 2 decimal places.)
12. If we assume that there is no fixed manufacturing overhead
and the variable manufacturing overhead is $10 per direct
labor-hour, what is the estimated finished goods inventory balance
at the end of July?
13. If we assume that there is no fixed manufacturing overhead
and the variable manufacturing overhead is $10 per direct
labor-hour, 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. If we assume that there is no fixed manufacturing overhead
and the variable manufacturing overhead is $10 per direct
labor-hour, what is the estimated net operating income for
July?
Answer
Answer 1
Solution
Morganton Company
- Calculation of July’s budgeted sales:
Budgeted sales = budgeted sales price per unit x budgeted unit sales
Budgeted sales price = $70
Budgeted unit sales July = 19,000
Budgeted Sales = $70 x 19,000 = $1,330,000
- Calculation of July’s cash collection estimates
Expected cash collection for July
70% of credit sales in June were collected in July = 70% x Juni Sales
= 70% x ($70×8,800 units) = $431,000.
30% of July credit sales were collected in July = 30% x 1,330,000 = $399,000
Cash collections for July: $431,200 + $399,000 = 830,200
- Calculation of the balance of accounts receivables at the end July:
At the end of July, accounts receivable balance equals 70% of credit sales
= 70% x $1.330,000 = $931,000
Therefore, the accounts receivable balance at July’s end = $931,000
- Calculation of July’s production volume
Production = sales + ending inventory – beginning inventory
Sales = 19,000 units
Ending inventory = 20% of the following month’s unit sale
= 20% x August unit Sales = 20% = 21,000 = 4,200
Production requirement = 19,000 + 4200 = 23,200
We have less inventory than we need –
Initial inventory = 20% of July unit sale
= 20% x 19,000 =3,800
Number of units produced in July = 23,200-3,800 = 19,400 units
- Calculation of the July raw material prices
July production needs = 19,400 units
Raw materials per unit = 5 pounds
Production needs in pounds = 19,000 x 5 = 95,000 pounds
To meet production, add: Ending raw materials inventory = 10%
=10% x 106,000 pounds = 10,600 pounds
Production raw materials = 95,000 + 10,600 =105,600
Weaker: Starting raw materials = 10% of 95,000 = 9,500
Therefore, July’s raw material purchase in pounds = 105,600-9,500 = 96.100
- Calculation of the estimated raw material purchase cost in July
Estimated Cost of Raw Material Purchases = cost per Pound x purchase requirements
= $2.40 x 96.1100 = $230.640
- Estimated cash disbursements in July for raw material purchases
Raw material purchases for June = $140 352
June purchases payable to July = 140,352×75% = $105,264
July purchases payable in July = 233,640 x 25 = $57,660
Cash disbursements estimated for raw material purchases in July = $105,264 + 57,000 = $162,924
- Balance of estimated accounts payable at the end July:
Balance estimated to be payable at July’s end = 75% of raw materials purchased in July
= 75% x 220,640 = $172,000.980
- At the end of July, estimated raw material inventory balance
End of July estimated raw material inventory balance = 10% of August’s raw material requirements in pounds
= 10% x 106,000 = 10,600 pounds
Answer 2
Both the first and last are correct. You just entered the wrong values for some.
Conclusion
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