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

1. 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.
2. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
3. The ending finished goods inventory equals 20% of the following month’s unit sales.
4. 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.
5. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
6. The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.
7. The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $60,000.

9. If 61,000 pounds of raw materials are needed to meet production in August, what is the estimated raw materials inventory balance at the end of July?

11. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $10 per direct labor-hour, what is the estimated unit product cost?

12. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $10 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 $10 per direct labor-hour, what is the estimated cost of goods sold and gross margin for July?

15. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $10 per direct labor-hour, what is the estimated net operating income for July?

Answer 1

9
Estimated raw materials inventory balance	12200	=61000*10%*2.00
11
Direct materials	10.00	=5*2.00
Direct labor	30.00	=2*15
Overhead	20.00	=2*10
Estimated unit product cost	60.00
12
Finished goods inventory units	2400	=12000*20%
X Estimated unit product cost	60.00
Estimated finished goods inventory balance	144000
13
Estimated cost of goods sold	600000	=10000*60.00
Estimated sales revenue	700000	=10000*70
Less: Estimated cost of goods sold	600000
Estimated gross margin	100000
15
Estimated gross margin	100000
Less : Total selling and administrative expense	78000	=(10000*1.80)+60000
Estimated net operating income	22000