Question

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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 9,200, 23,000, 25,000, and 26,000 units, respectively. All sales are on credit.

b) Thirty percent of credit sales are collected in the month of the sale and 70% 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 4 pounds of raw materials. The raw materials cost $2.50 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 $13 per hour. Each unit of finished goods requires two direct labor-hours.

g) The variable selling and administrative expense per unit sold are $1.80. The fixed selling and administrative expense per month are $62,000.

Required:

13. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $8 per direct labor-hour, what are the estimated cost of goods sold and gross margin for July?

Estimated cost of goods sold?
Estimated gross margin?

14. What are the estimated total selling and administrative expense for July?

Answer 1

Direct Material $4*2.50	$                       10.00
direct labor $13*2 DLH	$                       26.00
variable manufacturing overhead $8*2	$                       16.00
cost of goods sold per Unit	$                       52.00

Estimated cost of goods sold?
23000 Units sold *$52 per unit	$         1,196,000.00

Sales 23000*$60 Selling price per unit	$         1,380,000.00
Less Cost of Goods sold	$         1,196,000.00
Estimated gross margin	$            184,000.00

Estimated total selling and administrative expense for July
Variable Selling Expense 23000 units *1.80	$                                  41,400.00
Fixed Selling Expense	$                                  62,000.00
estimated total selling and administrative expense	$                                103,400.00