Question

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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.

1.

value:
21.00 points

Required information

Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June).     

References

eBook & Resources

WorksheetLearning Objective: 08-03b Prepare the following components of the operating budget: Production budget.Learning Objective: 08-03e Prepare the following components of the operating budget: Manufacturing overhead budget.

Difficulty: 3 HardLearning Objective: 08-03c Prepare the following components of the operating budget: Raw materials purchases budget.Learning Objective: 08-03f Prepare the following components of the operating budget: Cost of goods sold budget.

Learning Objective: 08-03a Prepare the following components of the operating budget: Sales budget.Learning Objective: 08-03d Prepare the following components of the operating budget: Direct labor budget.Learning Objective: 08-03g Prepare the following components of the operating budget: Selling and administrative expense budget.

Check my work

2.

value:
4.00 points

Required information

Required:
Complete Iguana's budgeted income statement for quarter 2. (Round cost per unit in intermediate calculations and final answers to 2 decimal places.)

Answer 1

1 Production budget for quarter 2

Particulars		April	May	June	July
Sales		310	360	460	435
+ Desired ending finished goods inventory		144	184	174	194 (485x40%)
- opening ending finished goods inventory		(124)	(144)	(184)	(174)
Total production for the quarter		330	400	450	455

2. Manufacturing overhead budget

Particulars	April	May	June
A Units produced	330	400	450
B Per unit variable cost	0.4	0.4	0.4
C Total variable cost (A x B)	132	160	180
D. Fixed manufacturing overhead	600	600	600
Total manufacturing overhead (C+D)	732	760	780

3 . Raw material purchase budget

	April	May	June
Units/frames produced	330	400	450
Bamboo per frame	4	4	4
A Total bamboo for production (in feet)	1320	1600	1800
B Desired ending bamboo invenory	480 (1600x30%)	540 (1800x30%)	546 (455x4x30%)
C Beginning inventory of bamboo	396 (1320x30%)	480	540
D Total purchases (A+B-C)	1404	1660	1806
E Price per bamboo feet	$3.50	$3.50	$3.50
Total price (dxe)	$4914	$5810	$6321

4 . For preparing cost of goods sold budget first we will find out variable cost per frame or unit

Direct material (4x3.5)	14
Direct labour (0.5x12)	6
Variable manufacturing overhead	0.4
Total variable manufacturing cost	20.40

Cost of goods sold budget

Particulars	April	May	June
Variable manufacturing cost	20.4	20.4	20.4
Total units sold	310	360	460
Total variable manufacturing cost	6324	7344	9384
Fixed manufacturing overhead	600	600	600
Cost of goods sold	6924	7944	9984

5. Direct labour budget

Particulars	April	May	June
Time taken to produce a unit	0.5 hrs	0.5	0.5
Total production	330	400	450
Total production hrs	165	200	225
Rate per hour	12	12	12
Total direct labour	1980	2400	2700

6 . Selling & adm budget

Particulars	April	May	June
Variable selling cost per unit	0.5	0.5	0.5
Total units sold	310	360	460
Total variable selling exp	155	180	230
Total fixed exp	650	650	650
Total selling and adm exp	805	830	880

7. Income statement

Particulars	April	May	June	Total
Sales	9300 (310x30)	10800 (360x30)	13800 (460x30)	33900
-COGS (as per COGS budget)	6924	7944	9984	24852
- selling & ADM exp (asper selling and ADM budget)	805	830	880	2515
Net profit	1571	2026	2936	6533