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Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot.
Iguana, Inc., manufactures bamboo picture frames that sell for $30 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 $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 335 370 May 420 June 520 July August 495 545 Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,000 ($750 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $850 per month plus $0.50 per unit sold. Iguana, Inc., had $11,000 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 $3,700. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $270 in depreciation. During April, Iguana plans to pay $4,200 for a piece of equipment.
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