What is the estimated finished goods inventory balance

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Reference no: EM131808109

The following information applies to the questions displayed below.

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 $60. Budgeted unit sales for June, July, August, and September are 8,300, 14,000, 16,000, and 17,000 units, respectively. All sales are on credit.

b. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.

c. The ending finished goods inventory equals 25% of the following month's unit sales.

d. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.

e. Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month.

f. The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.

g. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $64,000.

Questions :

1. If the company always uses an estimated predetermined plantwide overhead rate of $6 per direct labor-hour, what is the estimated unit product cost? (Round your answer to 2 decimal places.)

Unit product cost;

2. What is the estimated finished goods inventory balance at the end of July, if the company always uses an estimated predetermined plantwide overhead rate of $6 per direct labor-hour?

Ending finished goods inventory;

3. What is the estimated cost of goods sold and gross margin for July, if the company always uses an estimated predetermined plantwide overhead rate of $6 per direct labor-hour?

Estimated cost of goods sold;

Estimated gross margin;

4. What is the estimated net operating income for July, if the company always uses an estimated predetermined plantwide overhead rate of $6 per direct labor-hour?

Net operating income;

Reference no: EM131808109

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