Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each fr
ID: 2433776 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies:
Ending finished goods inventory should be 40 percent of next month’s sales.
Ending raw materials inventory should be 30 percent of next month’s production.
Expected unit sales (frames) for the upcoming months follow:
Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.
Iguana, Inc., had $10,800 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 raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $2,400. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $320 in depreciation. During April, Iguana plans to pay $4,100 for a piece of equipment.
March 360 April 420 May 470 June 570 July 545 August 595 value: 25.00 points Required information PA8-1 Preparing Operating Budgets [LO 8-3a, b, c, d, e, f, gl Required: Compute the following for Iguana, Inc., for the second quarter (April, May, and June). 2nd Quarter Total April May June 1. Budgeted Sales Revenue 2. Budgeted Production in Units 3. Budgeted Cost of Raw Material Purchases 4. Budgeted Direct Labor Cost 5. Budgeted Manufacturing Overhead 6. Budgeted Cost of Goods Sold. S 8,400 S 9,400 S 1400 S 29,200 S 0.00Explanation / Answer
Per Chegg guidelines, 4 sub-parts have been answered.
2 Production Budget April May June 2nd Quarter Total July Expected unit sales 420 470 570 1460 545 Add: Desired ending finished goods unit 188 228 218 218 238 Total required units 608 698 788 1678 783 Less: Beginning finished goods 168 188 228 168 218 Budgeted production in units 440 510 560 1510 565 3 Raw Material Purchases April May June 2nd Quarter Total Units to be produced 440 510 560 1510 Raw material per unit (feet) 4 4 4 4 Total material needed for production 1760 2040 2240 6040 Add: Desired ending raw materials inventory 612 672 678 678 Total materials required 2372 2712 2918 6718 Less: Beginning raw materials inventory 528 612 672 528 Raw material purchases 1844 2100 2246 6190 Cost per foot $ 1.50 1.50 1.50 1.50 Budgeted cost of raw material purchases $ 2766 3150 3369 9285 4 Direct Labor April May June 2nd Quarter Total Units to be produced 440 510 560 1510 Direct labor per unit 0.5 0.5 0.5 0.5 Total direct labor required 220 255 280 755 Direct labor rate per hour $ 12 12 12 12 Budgeted direct labor cost $ 2640 3060 3360 9060 5 Manufacturing Overhead April May June 2nd Quarter Total Variable overhead 88 102 112 302 Fixed overhead 600 600 600 1800 Budgeted manufacturing overhead $ 688 702 712 2102