Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of
bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages
$14 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
350
April
400
May
450
June
550
July
August
525
575
Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing
overhead is estimated to be $10,800 ($900 per month) for expected production of 4,000 units for the year. Selling and
administrative expenses are estimated at $950 per month plus $0.60 per unit sold.
Iguana, Incorporated, had $11,900 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 $4,000. All other operating costs are paid during the
month incurred. Monthly fixed manufacturing overhead includes $300 in depreciation. During April, Iguana plans to
pay $2,000 for a piece of equipment.
Required:
Complete Iguana's budgeted income statement for quarter 2.
mit in intermediate calculations to 2 decimal places.
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Transcribed Image Text:Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14 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 350 April 400 May 450 June 550 July August 525 575 Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $10,800 ($900 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $950 per month plus $0.60 per unit sold. Iguana, Incorporated, had $11,900 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 $4,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $300 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment. Required: Complete Iguana's budgeted income statement for quarter 2. mit in intermediate calculations to 2 decimal places.
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