Question

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.

Required:

1. Compute the following for Iguana, Inc., for the second quarter (April, May, and June): Budgeted Sales Revenue

Budgeted Production in Units

Budgeted Cost of Raw Materials Purchases

Budgeted Direct Labor Cost

Budgeted Manufacturing Overhead

Budgeted Cost of Goods Sold

Total Budgeted Selling and Administrative Expenses.

2. Complete Iguana's budgeted income statement for quarter 2.

Answer 1

Solution:

Part 1-1 – Sales Budget

Sales Budget
	April	May	June	2nd Quarter Total
Budgeted Sales (Units)	310	360	460	1,130
Unit Selling Price	$30	$30	$30	$30
Budgeted Sales Revenue in dollars	$9,300	$10,800	$13,800	$33,900

Part 1-2 -- Budgeted Production in Units

Production Budget
	April	May	June	2nd Quarter Total	July
Next Month's Expected Unit Sales	360	460	435		485
Ratio of inventory to future sales	40%	40%	40%		40%
Budgeted Finished Goods Ending Inventory (units)	144	184	174		194
Add: Budgeted Sales (units)	310	360	460		435
Required units of available production	454	544	634		629
Less: Budgeted Beginning Inventory (Ending Finished Goods Inventory of last month)	124	144	184		174
Units to be produced	330	400	450	1,180	455

Part 1-3 -- Budgeted Cost of Raw Materials Purchases

Raw Materials Budget
	April	May	June	2nd Quarter Total	July
Production Budget (units)	330	400	450		455
Bamboo requirements per unit (in linear feet)	4	4	4		4
Total raw materials needed for production (in linear feet)	1320	1600	1800		1820
Add: Raw materials ending inventory (30% of the next months materials requirements)	480	540	546
Total materials requirements (in feet)	1800	2140	2346
Less: Raw Materials Beginning Inventory (Ending Inventory of Previous Month)	396	480	540
Total Raw materials to be purchased (in linear feet)	1404	1660	1806	4870
Raw material cost per foot	$3.50	$3.50	$3.50	$3.50
Budgeted Cost of Raw material purchases	$4,914	$5,810	$6,321	$17,045

Part 1-4 -- Budgeted Direct Labor Cost

Direct Labor Budget
	April	May	June	2nd Quarter Total
Units to be produced	330	400	450
Required Direct Labor Hour per unit	0.50	0.50	0.50
Total Direct Labor Hours Required	165	200	225
Direct Labor Cost per hour	$12	$12	$12
Budgeted Direct Labor Cost	$1,980	$2,400	$2,700	$7,080

You need to fill the detail in the answer format as follows:

	April	May	June	2nd Quarter Total
1. Budgeted Sales Revenue	$9,300	$10,800	$13,800	$33,900
2. Budgeted Production in Units	330	400	450	1,180
3. Budgeted Cost of Raw Materials Purchases	$4,914	$5,810	$6,321	$17,045
4. Budgeted Direct Labor Cost	$1,980	$2,400	$2,700	$7,080

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.