Question

Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies:

• Ending finished goods inventory should be 40 percent of next month’s sales.
• Ending direct materials inventory should be 30 percent of next month’s production.

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

March	345
April	390
May	440
June	540
July	515
August	565

Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 6,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.

Iguana, Inc., had $15,800 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 $3,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $290 in depreciation. During April, Iguana plans to pay $3,000 for a piece of equipment.

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

Need:

April May June Total

Budgeted sales revenue

Budgeted cost of goods sold

Budgeted gross margin

Budgeted selling and administrative expenses

Budgeted net operating income

Answer 1

		Fixed Manufacturing Overhead per unit	$1.20	(7200/6000)
		Variable Manufacturing overhead per unit	$0.30
		Total Manufacturing Overhead per unit	$1.50
		Direct material cost per unit	$6.00	(4*1.5)
		Direct Labor cost per unit	$6.50	(13*(30/60)
		Unit Manufacturing Cost	$14.00	(1.5+6+6.5)
				April	May	June	Total
	A	Unit sales		390	440	540	1370
	B	Sales Price		$20	$20	$20
	C=A*B	Budgeted Sales Revenue		$7,800	$8,800	$10,800	$27,400
	D=A*14	Budgeted Cost of goods Sold		$5,460	$6,160	$7,560	$19,180
	E=C-D	Budgeted Gross Margin		$2,340	$2,640	$3,240	$8,220
	F=A*0.5	Variable Selling & Admin expenses		$195	$220	$270	$685
	G	Fixed Selling & admin Expenses		$650	$650	$650	$1,950
	H=F+G	Budged Selling & admin expenses		$845	$870	$920	$2,635
	I=E-H	Budgeted net Operating Income		$1,495	$1,770	$2,320	$5,585