anton Company makes one product and it provi ving information to help prepare the master bud e budgeted selling price per unit is $65. Budget ne, July, August, and September are 9,000, 21,0 ,000 units, respectively. All sales are on credit. irty percent of credit sales are collected in the m d 70% in the following month. e ending finished goods inventory.equals 30%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
**Morganton Company Master Budget Information**

Morganton Company manufactures a single product and provides the following data for budget preparation:

a. **Selling Price and Sales Forecast:**
   - Budgeted selling price per unit: $65.
   - Budgeted unit sales for:
     - June: 9,000 units.
     - July: 21,000 units.
     - August: 23,000 units.
     - September: 24,000 units.
   - All sales are on credit.

b. **Credit Sales Collection:**
   - 30% of credit sales are collected in the same month.
   - 70% are collected in the following month.

c. **Finished Goods Inventory:**
   - Ending inventory equals 30% of the next month’s unit sales.

d. **Raw Materials Inventory:**
   - Ending inventory equals 20% of the next month’s production needs.
   - Each unit requires 5 pounds of raw materials.
   - Cost per pound of raw materials: $2.70.

e. **Raw Material Purchases Payment:**
   - 20% of purchases paid in the purchase month.
   - 80% paid in the following month.

f. **Labor Costs:**
   - Direct labor rate: $14 per hour.
   - Each unit requires two labor hours.

g. **Selling and Administrative Expenses:**
   - Variable expense per unit: $1.60.
   - Fixed monthly expense: $60,000.

**Budget Calculation Example:**

- If 116,500 pounds of raw materials are needed for August, estimate the accounts payable at the end of July, considering the purchase and payment terms outlined above.
Transcribed Image Text:**Morganton Company Master Budget Information** Morganton Company manufactures a single product and provides the following data for budget preparation: a. **Selling Price and Sales Forecast:** - Budgeted selling price per unit: $65. - Budgeted unit sales for: - June: 9,000 units. - July: 21,000 units. - August: 23,000 units. - September: 24,000 units. - All sales are on credit. b. **Credit Sales Collection:** - 30% of credit sales are collected in the same month. - 70% are collected in the following month. c. **Finished Goods Inventory:** - Ending inventory equals 30% of the next month’s unit sales. d. **Raw Materials Inventory:** - Ending inventory equals 20% of the next month’s production needs. - Each unit requires 5 pounds of raw materials. - Cost per pound of raw materials: $2.70. e. **Raw Material Purchases Payment:** - 20% of purchases paid in the purchase month. - 80% paid in the following month. f. **Labor Costs:** - Direct labor rate: $14 per hour. - Each unit requires two labor hours. g. **Selling and Administrative Expenses:** - Variable expense per unit: $1.60. - Fixed monthly expense: $60,000. **Budget Calculation Example:** - If 116,500 pounds of raw materials are needed for August, estimate the accounts payable at the end of July, considering the purchase and payment terms outlined above.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Risk Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education