In: Accounting
Iguana, Inc., manufactures bamboo picture frames that sell for $25
each. Each frame requires 4 linear feet of bamboo, which costs
$2.50 per foot. Each frame takes approximately 30 minutes to build,
and the labor rate averages $14 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 | 370 |
April | 440 |
May | 490 |
June | 590 |
July | 565 |
August | 615 |
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 $11,200 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 $4,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $340 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.
1.
value:
33.33 points
Required information
Required:
Compute the following for Iguana, Inc., for the second quarter
(April, May, and June).
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