Morganton Company makes one product and provided the following information to help prepare its master budget: 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. 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 30% of the following month’s unit sales. The ending raw materials inventory equals 20% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.70 per pound. Twenty percent of raw materials purchases are paid for in the month of purchase and 80% 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 $1.60. The fixed selling and administrative expense per month is $60,000. Foundational 8-2 (Algo) 2. What are the expected cash collections for July? 3. What is the accounts receivable balance at the end of July? 4. What is the estimated production in units 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 provided the following information to help prepare its master budget:

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.
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 30% of the following month’s unit sales.
The ending raw materials inventory equals 20% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.70 per pound.
Twenty percent of raw materials purchases are paid for in the month of purchase and 80% 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 $1.60. The fixed selling and administrative expense per month is $60,000.

Foundational 8-2 (Algo)

2. What are the expected cash collections for July?

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

4. What is the estimated production in units for July?

5. If 116,500 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

6. If 116,500 pounds of raw materials are needed to meet production in August, what is the estimated cost of raw materials purchases for July?

Expert Solution

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Since there are multiple subparts asked, we will answer only first three subparts.

Master budget

refers as the aggregation of all the lower levels budget , which are calculated by the various functional areas of business and is a strategy thats documents the financial statements , cash flow forecast etc.

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