Question

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 $70. Budgeted unit sales for June, July, August, and September are 8,400, 10,000, 12,000, and 13,000 units, respectively. All sales are on credit.

b. 40% of credit sales are collected in the month of the sale and 60% in the following month.

c. The ending finished goods inventory equals 20% of the following month's unit saies.

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 $2.00 per pound.

e. 30% of raw materials purchases are paid for in the month of purchase and 70% in the following month.

f. The direct labour wage rate is $15 per hour. Each unit of finished goods requires two direct labour hours.

g. The variable selling and administrative expense per unit sollis $1.80. The fixed selling and administrative expense per month is $60,000.

Required:

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7-1 What are the budgeted sales for July?

7-2 What are the expected cash collections for July?

7-3 What is the accounts receivable balance at the end of July?

7-4 According to the production budget, how many units should be produced in July?

7-5 If 61,000 pounds of raw materials are needed for production in August, how many pounds of raw materials should be purchased in July?

7-6 What is the estimated cost of raw materials purchases for July?

7-7 If the cost of raw materials purchases in June is $85,880, what are the estimated cash disbursements for raw materials purchases in July?
7-8 What is the estimated accounts payable balance at the end of July?

7-9 What is the estimated raw materials inventory balance at the end of July?

7-10 What is the total estimated direct labour cost for July assuming the direct labour workforce is adjusted to match the hours required to produce the forecasted number of units produced?

7-11 If the company always uses an estimated predetermined plantwide overhead rate of $10 per direct labour hour, what is the estimated unit product cost?

7-12 What is the estimated finished goods inventory balance at the end of July?
7-13 What is the estimated cost of goods sold and gross margin for July?
7-14 What is the estimated total selling and administrative expense for July?
7-15 What is the estimated net operating income for July?

Answer 1

The budgeted sales for July are $700,000. The expected cash collections for July are $655,200. The accounts receivable balance at the end of July is $352,800.

Step-by-step explanation:

7-1 What are the budgeted sales for July?

To calculate the budgeted sales for July, we refer to the information provided. The budgeted unit sales for July are 10,000 units and the selling price per unit is $70. Therefore, the budgeted sales for July would be 10,000 units multiplied by $70, which equals $700,000.

7-2 What are the expected cash collections for July?

To calculate the expected cash collections for July, we need to consider the credit sales from June and July. 40% of credit sales from June are collected in July, and 60% of credit sales from July are collected in August. Given that the budgeted sales for June were 8,400 units and the selling price per unit is $70, the credit sales for June would be 8,400 units multiplied by $70, which equals $588,000. 40% of $588,000 is $235,200. Similarly, the credit sales for July would be 10,000 units multiplied by $70, which equals $700,000. 60% of $700,000 is $420,000. Therefore, the expected cash collections for July would be $235,200 (from June Sales) + $420,000 (from July Sales) = $655,200.

7-3 What is the accounts receivable balance at the end of July?

To calculate the accounts receivable balance at the end of July, we need to subtract the cash collections from the credit sales. The credit sales for June were $588,000 and we collected $235,200 in July. Therefore, the accounts receivable balance at the end of July would be $588,000 - $235,200 = $352,800.