Morganton Company makes one product and it provided the following information to help prepare the master budget: a. The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,000, 21,000, 23,000, and 24,000 units, respectively. All sales are on credit. b. Thirty percent of credit sales are collected in the month of the sale and 70% in the following month. c. The ending finished goods inventory equals 30% of the following month's unit sales
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
![**Morganton Company Budget Preparation Information**
Morganton Company manufactures a single product and has provided the following data to assist in preparing the master budget:
a. **Selling Price**: The budgeted selling price per unit is $65.
**Budgeted Unit Sales (June to September)**:
- June: 9,000 units
- July: 21,000 units
- August: 23,000 units
- September: 24,000 units
All sales are on credit.
b. **Credit Collection**: 30% of credit sales are collected in the sale month, and 70% in the following month.
c. **Finished Goods Inventory**: The ending finished goods inventory should be 30% of the following month’s unit sales.
d. **Raw Materials Inventory**: The ending inventory for raw materials should be 20% of the following month’s raw material production needs. Each finished product unit requires 5 pounds of raw materials, priced at $2.70 per pound.
e. **Payment for Raw Materials**: 20% of raw materials purchases are paid in the purchase month, and the remaining 80% in the following month.
f. **Labor Costs**: The direct labor wage rate is $14 per hour, with each unit requiring two direct labor-hours.
g. **Selling and Administrative Expenses**:
- Variable expenses: $1.60 per unit sold.
- Fixed expenses: $60,000 per month.
**Question for Analysis**:
10. Calculate the total estimated direct labor cost for July.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F34496cef-5563-40c5-9778-ec4dbcf8a96a%2F0f8f99f6-d527-4aff-a036-f9ccf8719def%2Fdp75dec_processed.jpeg&w=3840&q=75)
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