[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 $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. d. 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. e. Twenty percent of raw materials purchases are paid for in the month of purchase and 80% in the following month. f. The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.60. The fixed selling and administrative expense per month is $60,000. 14. What is the estimated total selling and administrative expense for July? Total selling and administrative expenses
[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 $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. d. 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. e. Twenty percent of raw materials purchases are paid for in the month of purchase and 80% in the following month. f. The direct labor wage rate is $14 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.60. The fixed selling and administrative expense per month is $60,000. 14. What is the estimated total selling and administrative expense for July? Total selling and administrative expenses
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
![**Morganton Company Budget Preparation Information**
Morganton Company manufactures a single product and provides the following details to aid in the preparation of the master budget:
a. **Selling Price and Sales Volume**:
- Budgeted selling price per unit: $65.
- Monthly unit sales: June (9,000), July (21,000), August (23,000), September (24,000).
- All transactions are credit sales.
b. **Credit Collection**:
- 30% of credit sales are collected within the sale month.
- Remaining 70% collected the following month.
c. **Finished Goods Inventory**:
- Must match 30% of the subsequent month’s unit sales.
d. **Raw Materials Inventory**:
- Equals 20% of the following month’s production needs.
- Each unit requires 5 pounds of raw materials.
- Cost: $2.70 per pound.
e. **Payment for Raw Materials**:
- 20% paid in the purchase month, 80% in the subsequent month.
f. **Direct Labor**:
- Wage rate: $14 per hour.
- Each unit requires two direct labor hours.
g. **Selling and Administrative Expenses**:
- Variable cost: $1.60 per unit sold.
- Fixed cost: $60,000 monthly.
**Question 14**: Calculate the estimated total selling and administrative expense for July.
- **Total selling and administrative expenses box**: [Answer here]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F34496cef-5563-40c5-9778-ec4dbcf8a96a%2Fc1458893-63eb-439b-a9ee-439c15933ccb%2Fgjqsrn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Morganton Company Budget Preparation Information**
Morganton Company manufactures a single product and provides the following details to aid in the preparation of the master budget:
a. **Selling Price and Sales Volume**:
- Budgeted selling price per unit: $65.
- Monthly unit sales: June (9,000), July (21,000), August (23,000), September (24,000).
- All transactions are credit sales.
b. **Credit Collection**:
- 30% of credit sales are collected within the sale month.
- Remaining 70% collected the following month.
c. **Finished Goods Inventory**:
- Must match 30% of the subsequent month’s unit sales.
d. **Raw Materials Inventory**:
- Equals 20% of the following month’s production needs.
- Each unit requires 5 pounds of raw materials.
- Cost: $2.70 per pound.
e. **Payment for Raw Materials**:
- 20% paid in the purchase month, 80% in the subsequent month.
f. **Direct Labor**:
- Wage rate: $14 per hour.
- Each unit requires two direct labor hours.
g. **Selling and Administrative Expenses**:
- Variable cost: $1.60 per unit sold.
- Fixed cost: $60,000 monthly.
**Question 14**: Calculate the estimated total selling and administrative expense for July.
- **Total selling and administrative expenses box**: [Answer here]
Expert Solution
Step 1
Introduction:
Variable selling and administrative expenses are calculated based on budgeted number of units estimated to be sold. Hence, variable expenses increases with the increase in number of units sold.
Fixed selling and administrative expenses remains same irrespective of number of units sold.
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