Question
Morganton Company makes one product, and it provided the following information to help prepare the master budget for its first four months of operations: a)
Morganton Company makes one product, and it provided the following information to help prepare the master budget for its first four months of operations:
a) The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,400, 10,000, 12,000, and 13,000 units, respectively. All sales are on credit.
b) 40% of credit sales are collected in the month of the sale and 60% in the following month.
c) The ending finished goods inventory equals 20% of the following months unit sales.
d) The ending raw materials inventory equals 10% of the following months raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.
e) 30% of raw materials purchases are paid for in the month of purchase and 70% in the following month.
f) The direct labour wage rate is $15 per hour. Each unit of finished goods requires two direct labour-hours.
g) The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $60,000.
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