Question

Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales.

Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

March	305
April	310
May	360
June	460
July	435
August	485

Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.

     Iguana, Inc., had $13,600 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $3,600. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $210 in depreciation. During April, Iguana plans to pay $3,600 for a piece of equipment.

April	May	June	2nd Quarter Total
1.	Budgeted Sales Revenue	$9,300selected answer correct	$10,800selected answer correct	$13,800selected answer correct	$33,900
2.	Budgeted Production in Units	330selected answer correct	400selected answer correct	450selected answer correct	1,180not attempted
3.	Budgeted Cost of Raw Material Purchases	$4,914selected answer correct	$5,810selected answer correct	$6,535selected answer incorrect	$17,259
4.	Budgeted Direct Labor Cost	$1,980selected answer correct	$2,400selected answer correct	$2,700selected answer correct	$7,080
5.	Budgeted Manufacturing Overhead	$732selected answer correct	$760selected answer correct	$780selected answer correct	$2,272
6.	Budgeted Cost of Goods Sold.	not attempted	not attempted	not attempted	$0
7.	Total Budgeted Selling and Adm. Expenses	not attempted	not attempted	not attempted	$0.00

Answer 1

Solution:-

Sl.no		April	May	June	2nd quarter total
1.	Budgeted Sales Revenue	$9,300	$10,800	$13,800	$33,900
2.	Budgeted Production in Units	330	400	450	1,180
3.	Budgeted Cost of Raw Material Purchases	$4,914	$5,810	$6,535	$17,259
4.	Budgeted Direct Labor Cost	$1,980	$2,400	$2,700	$7,080
5.	Budgeted Manufacturing Overhead	$732	$760	$780	$2,272
6.	Budgeted Cost of Goods Sold.	$60,096	$86,570	$108,565	=60,096 + 86,570 + 108,565 = $255,231
7.	Total Budgeted Selling and Adm. Expenses	$805	$830	$880	= 805 + 880 + 880 = $2,515

Working sheet:-

Budgeted cost of goods sold	April	May	June
Raw material cost	$4,914	$5,810	$6,535
Labor cost =( budgeted production units * direct labor cost ) * labor rate per hour	=( 330 * 1980) / 12 = $54,450	= (400 * $2,400 ) / 12 = $80,000	= (450 * $2,700 ) / 12 = $101,250
Variable manufacturing overhead =( Budgeted Production in Units * 0.40)	= (330 * 0.40) = $132	= (400 * 0.40) = $160	= (450 *0.40) = $180
Fixed manufacturing overhead	$600	$600	$600
Cost of goods sold = sum of all thses terms	= 4,914 + 132 + 600 + 54,450 = $60,096	= 5,810+ 160 + 600 + 80,000 = $86,570	= 6,535 + 180+ 600+ $101,250 = $108,565

Total Budgeted Selling and Adm. Expenses	April	May	June
Units sold	310	360	460
Variable @0.50 per unit sold	= 310 * 0.50 = $155	= 360 * 0.50 = $180	= 460 * 0.50 = $230
Fixed	$650	$650	$650
Total Budgeted Selling and Adm. Expenses = unit sold + fixed )- Variable @0.50 per unit sold	= (310 + 650 ) - 155 = $805	=( 360 + 650) - 180 = $830	=(460 + 650) - 230 = $880