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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 $2.00 per foot. Each

Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $11 per hour. Iguana has the following inventory policies:

  • Ending finished goods inventory should be 40 percent of next months sales.
  • Ending direct materials inventory should be 30 percent of next months production.

Expected unit sales (frames) for the upcoming months follow:

March 290
April 280
May 330
June 430
July 405
August 455

Variable manufacturing overhead is incurred at a rate of $0.60 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 3,000 units for the year. Selling and administrative expenses are estimated at $700 per month plus $0.50 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 $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $180 in depreciation. During April, Iguana plans to pay $3,300 for a piece of equipment.

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