Required Information [The following information applies to the questions displayed below.] Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $15 per hour. Iguana has the following inventory policies: • Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March April May June July August 375 450 500 600 575 625 Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $6.000 ($500 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.70 per unit sold. Iguana, Incorporated, had $11,100 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale. Of direct materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Direct materials purchases for March 1 totaled $5,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $350 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment. Required: Compute the following for Iguana, Incorporated, for the second quarter (April, May, and June). 1. Budgeted Sales Revenue 2. Budgeted Production in Units 3. Budgeted Cost of Direct Material Purchases 4. Budgeted Direct Labor Cost 5. Budgeted Manufacturing Overhead 6. Budgeted Cost of Goods Sold 7. Total Budgeted Selling and Administrative Expense $ April 9,375 $ May 11,250 $ June 12,500 2nd Quarter Total $ $ $ $ $ $ 33,125 0 0 0 0 0 0

Required Information [The following information applies to the questions displayed below.] Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $15 per hour. Iguana has the following inventory policies: • Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March April May June July August 375 450 500 600 575 625 Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $6.000 ($500 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.70 per unit sold. Iguana, Incorporated, had $11,100 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale. Of direct materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Direct materials purchases for March 1 totaled $5,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $350 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment. Required: Compute the following for Iguana, Incorporated, for the second quarter (April, May, and June). 1. Budgeted Sales Revenue 2. Budgeted Production in Units 3. Budgeted Cost of Direct Material Purchases 4. Budgeted Direct Labor Cost 5. Budgeted Manufacturing Overhead 6. Budgeted Cost of Goods Sold 7. Total Budgeted Selling and Administrative Expense $ April 9,375 $ May 11,250 $ June 12,500 2nd Quarter Total $ $ $ $ $ $ 33,125 0 0 0 0 0 0

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 2CE: Sterling Corporation has an EOQ of 5,000 units. The company uses an average of 500 units per day. An...

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