Question

Morganton Company makes one product and provided the following information to help prepare its master budget:

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.
Thirty percent of credit sales are collected in the month of the sale and 70% in the following month.
The ending finished goods inventory equals 25% of the following month’s unit sales.
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.
Thirty five percent of raw materials purchases are paid for in the month of purchase and 65% in the following month.
The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours.
The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $67,000.

6. If 96,250 pounds of raw materials are needed to meet production in August, what is the estimated cost of raw materials purchases for July?
7. In July what are the total estimated cash disbursements for raw materials purchases? Assume the cost of raw material purchases in June is $136,560; and $96,250 pounds of raw materials are needed to meet production in August.
8. If 96,250 pounds of raw materials are needed to meet production in August, what is the estimated accounts payable balance at the end of July?
10. What is the total estimated direct labor cost for July?
11. If we assume there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated unit product cost?
Note: Round your answer to 2 decimal places.
12. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated finished goods inventory balance at the end of July?
13. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what are the estimated cost of goods sold and gross margin for July?
14. What is the estimated total selling and administrative expense for July?
15. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $6 per direct labor-hour, what is the estimated net operating income for July?

Answer 1

To calculate the estimated cost of raw materials purchases for July, multiply the raw materials needed for July production by the cost per pound. The estimated cost of raw materials purchases for July is $254,100.

To calculate the estimated cost of raw materials purchases for July, we need to determine the raw materials needed for August production and the percentage of raw materials purchases paid in the month of purchase.

Given that 96,250 pounds of raw materials are needed for August production, we can calculate the estimated raw materials purchases for July as follows:

1. Calculate the raw materials needed for July production: 96,250 pounds x 1.10 (10% buffer) = 105,875 pounds
2. Calculate the cost of raw materials purchases for July: 105,875 pounds x $2.40 per pound = $254,100

Therefore, the estimated cost of raw materials purchases for July is $254,100.