Question

In: Accounting

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.



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.

Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June).     Required:

 
 
    April May June 2nd Quarter Total
1. Budgeted Sales Revenue       $0
2. Budgeted Production in Units       0
3. Budgeted Cost of Direct Material Purchases       $0
4. Budgeted Direct Labor Cost       $0
5. Budgeted Manufacturing Overhead       $0
6. Budgeted Cost of Goods Sold       $0
7. Total Budgeted Selling and Administrative Expenses  

Solutions

Expert Solution

Solution 1:
Sales Budget - Iguana Inc.
Particulars April May June 2nd Quarter Total
Sales units 390 440 540 1370
Selling price per unit $20.00 $20.00 $20.00 $20.00
Budgeted Sales Revenue $7,800.00 $8,800.00 $10,800.00 $27,400.00
Solution 2:
Production Budget - Iguana Inc.
Particulars April May June 2nd Quarter Total July
Sales units 390 440 540 1370 515
Add: Desired ending inventory (40% of next month sales) 176 216 206 206 226
Less: Opening Inventory 156 176 216 156 206
Budgeted production units 410 480 530 1420 535
Solution 3:
Material Purchase Budget - Iguana Inc.
Particulars April May June 2nd Quarter Total
Unit to Produce 410 480 530 1420
Material needed per unit (In foot) 4 4 4 4
Material needed for unit to produce 1640 1920 2120 5680
Add: Desired units of material in ending inventory (30% of next month production) 576 636 642 642
Less: units of material in beginning inventory 492 576 636 492
Units of material to purchase 1724 1980 2126 5830
Cost per feet $1.50 $1.50 $1.50 $1.50
Budgeted cost of raw material purchases $2,586.00 $2,970.00 $3,189.00 $8,745.00
Solution 4:
Budgeted direct labor cost - Iguana Inc.
Particulars April May June 2nd Quarter Total
Unit to Produce 410 480 530 1420
Direct labor required per unit (in hrs) 0.5 0.5 0.5 0.5
Required direct labor hours 205 240 265 710
Labor rate $13.00 $13.00 $13.00 $13.00
Budgeted direct labor cost $2,665.00 $3,120.00 $3,445.00 $9,230.00
Solution 5:
Budgeted Manufacturing Overhead - Iguana Inc.
Particulars April May June 2nd Quarter Total
Unit to Produce 410 480 530 1420
Variable overhead cost per unit $0.30 $0.30 $0.30 $0.30
Total variable overhead cost $123.00 $144.00 $159.00 $426.00
Fixed overhead $600.00 $600.00 $600.00 $1,800.00
Budgeted manufacturing overhead $723.00 $744.00 $759.00 $2,226.00
Solution 6:
Compuatation of Unit Product Cost - Iguana Inc.
Particulars Per Unit Cost
Direct Material (4*$1.50) $6.00
Direct labor (0.5 * $13) $6.50
Variable manufacturing overhead $0.30
Fixed manufacturing overhead $1.20
Unit Product Cost $14.00
Budgeted Cost of goods sold - Iguana Inc.
Particulars April May June 2nd Quarter Total
Estimated Unit sales 390 440 540 1370
Unit cost $14.00 $14.00 $14.00 $14.00
Budgeted Cost of goods Sold $5,460.00 $6,160.00 $7,560.00 $19,180.00
Solution 7:
Budgeted Selling and administrative expenses - Iguana Inc.
Particulars April May June 2nd Quarter Total
Estimated Unit sales 390 440 540 1370
Variable selling expenses per unit $0.50 $0.50 $0.50 $0.50
Total variable selling expenses $195.00 $220.00 $270.00 $685.00
Fixed selling and administrative expenses $650.00 $650.00 $650.00 $1,950.00
Total selling and administrative expenses $845.00 $870.00 $920.00 $2,635.00

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