Question

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Morganton Company makes one product and it provided the following information to help prepare the master budget:

1. The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,000, 21,000, 23,000, and 24,000 units, respectively. All sales are on credit.
2. Thirty percent of credit sales are collected in the month of the sale and 70% in the following month.
3. The ending finished goods inventory equals 30% of the following month’s unit sales.
4. The ending raw materials inventory equals 20% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.70 per pound.
5. Twenty percent of raw materials purchases are paid for in the month of purchase and 80% in the following month.
6. The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours.
7. The variable selling and administrative expense per unit sold is $1.60. The fixed selling and administrative expense per month is $60,000.

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?

Answer 1

1) Answer to the Budgeted sales for July are :-

Budgeted Sales = Budgeted Unit sales * Budgeted Unit sale price per Unit

= 21000 Units * $ 65

= $ 13,65,000

2) The Expected Cash Collection for July are as below:

Details	Reference	June	July	Aug	Sep
Budgeted Selling Price per Unit	A	65	65	65	65
Budgeted Unit Sales	B	9000	21000	23000	24000
Budgeted Sales	C =A*B	5,85,000.00	13,65,000.00	14,95,000.00	15,60,000.00
Cash Collection (30% of Sales)		1,75,500.00	4,09,500.00	4,48,500.00	4,68,000.00
Cash Collection (70% of Sales)			4,09,500.00	9,55,500.00	10,46,500.00

SO the Total Cash Collection for the July Month are $ 819000.

3) the Accounts Receivable balance for the Month of July are as Below :

Total sales for July = $ 1365000

Less : 30 % of Sales are received in same Month i.e $409500 , so the balance 70 % of the sales are due which is received in next month. so the answe of part 3 is $ 955500.

4) As per the Production Budget the calculation of the units produced are as below :

Details	Reference	June	July	Aug
Budgeted Selling Price per Unit	A	65	65	65
Budgeted Unit Sales	B	9000	21000	23000
Budgeted Sales	C =A*B	5,85,000.00	13,65,000.00	14,95,000.00
Cash Collection (30% of Sales)		1,75,500.00	4,09,500.00	4,48,500.00
Cash Collection (70% of Sales)			4,09,500.00	9,55,500.00
Closing Stock (Finished Goods)	30 % of the Next Month Sales Unit	6300	6900	7200
Finished Goods Production	Closing stock + Sales - Opening Stock	15300	21600	23300

SO the Budgeted Production of Finished goods are 21600 units for July Month.