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Morganton Company makes one product, and has provided the following information to help prepare the master budget for its first four months of operations: The
Morganton Company makes one product, and has provided the following information to help prepare the master budget for its first four months of operations:
- The budgeted selling price per unit is $65. Budgeted unit sales for June, July, August, and September are 9,300, 24,000, 26,000, and 27,000 units, respectively. All sales are on credit.
- Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
- The ending finished goods inventory equals 30% of the following months unit sales.
- The ending raw materials inventory equals 20% of the following months raw materials production needs. Each unit of finished goods requires 4 kilograms of raw materials. The raw materials cost $2.50 per kilogram.
- Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
- The direct labour wage rate is $14 per hour. Each unit of finished goods requires two direct labour-hours.
- The variable selling and administrative expense per unit sold is $1.90. The fixed selling and administrative expense per month is $63,000.
REQUIRED:
1. What are the expected cash collections for July?
2. According to the production budget, how many units should be produced in July?
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