In: Accounting
The Foundational 15 [LO8-2, LO8-3, LO8-4, LO8-5, LO8-7, LO8-9,
LO8-10]
[The following information applies to the...
The Foundational 15 [LO8-2, LO8-3, LO8-4, LO8-5, LO8-7, LO8-9,
LO8-10]
[The following information applies to the questions
displayed below.]
Morganton Company makes one product and it provided the
following information to help prepare the master budget:
- The budgeted selling price per unit is $70. Budgeted unit sales
for June, July, August, and September are 8,400, 10,000, 12,000,
and 13,000 units, respectively. All sales are on credit.
- Forty percent of credit sales are collected in the month of the
sale and 60% in the following month.
- The ending finished goods inventory equals 20% of the following
month’s unit sales.
- The ending raw materials inventory equals 10% of the following
month’s raw materials production needs. Each unit of finished goods
requires 5 pounds of raw materials. The raw materials cost $2.00
per pound.
- Thirty percent of raw materials purchases are paid for in the
month of purchase and 70% in the following month.
- The direct labor wage rate is $15 per hour. Each unit of
finished goods requires two direct labor-hours.
- The variable selling and administrative expense per unit sold
is $1.80. The fixed selling and administrative expense per month is
$60,000.
a. What are the budgeted sales for July?
b. What are the expected cash collections for July?
c. What is the accounts receivable balance at the end of
July?
d. According to the production budget, how many units should be
produced in July?
e. 5. If 61,000 pounds of raw materials are needed to meet
production in August, how many pounds of raw materials should be
purchased in July?