Morganton Company makes one product and it provided the following information to help prepare the master budget: The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,900, 20,000, 22,000, and 23,000 units, respectively. All sales are on credit. Forty percent of credit sales are collected in the month of the sale and 60% in the following month. The ending finished goods inventory equals 20% 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 $2.50 per pound. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $70,000. Questions: A) If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $7 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.) B) If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $7 per direct labor-hour, what is the estimated finished goods inventory balance at the end of July? C) If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $7 per direct labor-hour, what is the estimated cost of goods sold and gross margin for July?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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

The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,900, 20,000, 22,000, and 23,000 units, respectively. All sales are on credit.
Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
The ending finished goods inventory equals 20% 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 $2.50 per pound.
Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours.
The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $70,000.

Questions:

A) If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $7 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)

B) If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $7 per direct labor-hour, what is the estimated finished goods inventory balance at the end of July?

C) If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $7 per direct labor-hour, what is the estimated cost of goods sold and gross margin for July?

Required information
[The following information applies to the questions displayed below.]
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 $60. Budgeted unit sales for June, July, August,
and September are 8,900, 20,000, 22,000, and 23,000 units, respectively. All sales
are on credit.
b. Forty percent 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 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 $2.50 per pound.
e. Thirty percent of raw materials purchases are paid for in the month of purchase and
70% in the following month.
f. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two
direct labor-hours.
g. The variable selling and administrative expense per unit sold is $1.50. The fixed
selling and administrative expense per month is $70,000.

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