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Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operations: a
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Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operations: |
| a. |
The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,600, 17,000, 19,000, and 20,000 units, respectively. All sales are on credit. |
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| b. |
Thirty percent of credit sales are collected in the month of the sale and 70% in the following month. |
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| c. | The ending finished goods inventory equals 25% of the following month’s unit sales. | ||||||||||||||
| d. |
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 $2.40 per pound. |
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| e. |
Thirty five percent of raw materials purchases are paid for in the month of purchase and 65% in the following month. |
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| f. |
The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours. |
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| g. |
The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $67,000. 1.
2.
3.
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Expert Solution
Answer:
Question 1). Solution :- Budgeted sales for July month = Number of units sold * Selling price per unit,
= 17000 * 60
= $ 1020000.
Conclusion :- Budgeted sales for July month = $ 1020000.
Question 2). Solution :- Calculation of expected cash collections for July month :-
= 30 % of 1020000 + 70 % of (8600 * 60)
= 30 % of 1020000 + 70 % of 516000
= 306000 + 361200
= $ 667200.
Conclusion :- Expected cash collections for July month = $ 667200.
Question 3). Solution :- Calculation of balance of accounts receivable at the end of July month :-
= 60 * 17000 * 70 %
= $ 714000.
Conclusion :- Balance of accounts receivable at the end of July month = $ 714000.
Question 4). Solution :- Calculation of number of units of product to be produced in July month :-
| Particulars | Units |
|
Sales (+) Closing inventory (19000 * 25 %) (-) Opening inventory (17000 * 25 %) |
17000 4750 4250 |
| Number of units of product to be produced in July month | 17500 |
Conclusion :- Number of units of product to be produced in July month = $ 17500.
Question 5). Solution :- Calculation of pound of raw material to be purchased in the July month :-
= Raw material required to achieve production target in july month + Closing ending inventory of raw material - Opening ending inventory of raw material.
= (17500 * 5) + 10 % of 96250 - 10 % of (17500 * 5)
= 87500 + 9625 - 8750
= 88375.
Conclusion :- Raw material to be purchased in July month = 88375 Pounds.
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