In: Accounting
Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $11 per hour. Iguana has the following inventory policies:
Expected unit sales (frames) for the upcoming months
follow:
March | 300 |
April | 300 |
May | 350 |
June | 450 |
July | 425 |
August | 475 |
Variable manufacturing overhead is incurred at a rate of $0.30 per
unit produced. Annual fixed manufacturing overhead is estimated to
be $9,600 ($800 per month) for expected production of 4,000 units
for the year. Selling and administrative expenses are estimated at
$850 per month plus $0.60 per unit sold.
Iguana, Inc., had $12,800 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 direct materials purchases, 80 percent is paid for during the
month purchased and 20 percent is paid in the following month.
Direct materials purchases for March 1 totaled $3,500. All other
operating costs are paid during the month incurred. Monthly fixed
manufacturing overhead includes $200 in depreciation. During April,
Iguana plans to pay $3,500 for a piece of equipment.
PA8-1 (Algo) Preparing Operating Budgets [LO 8-3a, b, c, d, e, f, g]
Required:
Compute the following for Iguana, Inc., for the second quarter
(April, May, and June).
Budgeted Sales Revenue:
Budgeted Production in units:
Budgeted Cost of Direct Material Purchases:
Budgeted Direct Labor Cost:
Budgeted Manufacturing Overhead:
Budgeted Cost of Goods Sold:
Total Budgeted Selling and Administrative Expenses:
Solution 1: | |||||
Sales Budget - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | |
Sales units | 300 | 350 | 450 | 1100 | |
Selling price per unit | $30.00 | $30.00 | $30.00 | $30.00 | |
Budgeted Sales Revenue | $9,000.00 | $10,500.00 | $13,500.00 | $33,000.00 | |
Solution 2: | |||||
Production Budget - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | July |
Sales units | 300 | 350 | 450 | 1100 | 425 |
Add: Desired ending inventory (40% of next month sales) | 140 | 180 | 170 | 170 | 190 |
Less: Opening Inventory | 120 | 140 | 180 | 120 | 170 |
Budgeted production units | 320 | 390 | 440 | 1150 | 445 |
Solution 3: | |||||
Material Purchase Budget - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | |
Unit to Produce | 320 | 390 | 440 | 1150 | |
Material needed per unit (In foot) | 4 | 4 | 4 | 4 | |
Material needed for unit to produce | 1280 | 1560 | 1760 | 4600 | |
Add: Desired units of material in ending inventory (30% of next month production) | 468 | 528 | 534 | 534 | |
Less: units of material in beginning inventory | 384 | 468 | 528 | 384 | |
Units of material to purchase | 1364 | 1620 | 1766 | 4750 | |
Cost per feet | $3.00 | $3.00 | $3.00 | $3.00 | |
Budgeted cost of raw material purchases | $4,092.00 | $4,860.00 | $5,298.00 | $14,250.00 | |
Solution 4: | |||||
Budgeted direct labor cost - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | |
Unit to Produce | 320 | 390 | 440 | 1150 | |
Direct labor required per unit (in hrs) | 0.5 | 0.5 | 0.5 | 0.5 | |
Required direct labor hours | 160 | 195 | 220 | 575 | |
Labor rate | $11.00 | $11.00 | $11.00 | $11.00 | |
Budgeted direct labor cost | $3,520.00 | $4,290.00 | $4,840.00 | $12,650.00 | |
Solution 5: | |||||
Budgeted Manufacturing Overhead - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | |
Unit to Produce | 320 | 390 | 440 | 1150 | |
Variable overhead cost per unit | $0.30 | $0.30 | $0.30 | $0.30 | |
Total variable overhead cost | $96.00 | $117.00 | $132.00 | $345.00 | |
Fixed overhead | $800.00 | $800.00 | $800.00 | $2,400.00 | |
Budgeted manufacturing overhead | $896.00 | $917.00 | $932.00 | $2,745.00 | |
Solution 6: | |||||
Compuatation of Unit Product Cost - Iguana Inc. | |||||
Particulars | Per Unit Cost | ||||
Direct Material (4*$3) | $12.00 | ||||
Direct labor (0.5 * $11) | $5.50 | ||||
Variable manufacturing overhead | $0.30 | ||||
Fixed manufacturing overhead | $2.40 | ||||
Unit Product Cost | $20.20 | ||||
Budgeted Cost of goods sold - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | |
Estimated Unit sales | 300 | 350 | 450 | 1100 | |
Unit cost | $20.20 | $20.20 | $20.20 | $20.20 | |
Budgeted Cost of goods Sold | $6,060.00 | $7,070.00 | $9,090.00 | $22,220.00 | |
Solution 7: | |||||
Budgeted Selling and administrative expenses - Iguana Inc. | |||||
Particulars | April | May | June | 2nd Quarter Total | |
Estimated Unit sales | 300 | 350 | 450 | 1100 | |
Variable selling expenses per unit | $0.60 | $0.60 | $0.60 | $0.60 | |
Total variable selling expenses | $180.00 | $210.00 | $270.00 | $660.00 | |
Fixed selling and administrative expenses | $850.00 | $850.00 | $850.00 | $2,550.00 | |
Total selling and administrative expenses | $1,030.00 | $1,060.00 | $1,120.00 | $3,210.00 |