Iguana, Inc., manufactures bamboo picture frames that sell for $24 each. Each fr
ID: 2448749 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $24 each. Each frame requires 3 linear feet of bamboo, which costs $2.20 per foot. Each frame takes approximately 24 minutes to build, and the labor rate averages $10.00 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 50 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 $.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,900.00 ($575.00 per month) for expected production of 4,200 units for the year. Selling and administrative expenses are estimated at $630.00 per month plus $.50 per unit sold. Required: Compute the following for Iguana, Inc., for the second quarter (April, May, and June). (Round your dollar amounts to 2 decimal places and your per unit amounts to the nearest whole number. Round intermediate calculations to I decimal place for direct labor hours and to 2 decimal places for per unit costs.)Explanation / Answer
Budgeted sale revenue= Sale Price/unit X expected Number of units sold Budgeted production in units= expected sale in units+budgeted ending inventory in units- Begining Inventory in units. For April: 250+320*50%+4200/12*30%-250*50%-4200/12*30%=285. Same calculation for all months As production for whole year is 4200units. So average monthly production is 350 units.Cost of raw material is 350units X $2.20/feet X3=$2310, But 30% of production in month is its opening inventory, so we have to less this opening inventory that is105 units=350units-105 units =245 units.and 245 units raw material cost = 245 units x $2.20/feet x 3=$1617 Budgeted direct labour cost= budgeted units produced for the month X Hours required for production per unit X rate /hour. fo rthe month April, Budgeted units to be produced is 350-125=225units, for May 350-160=190units, June=350-210=140units budgeted COGS= opening stock +purchase+direct expense-closing stock April May June 2nd quarter Total 1. Budgeted Sale revenue 6000 7680 10080 $23760 2. Budgeted Production in Units 285 370 395 1050 3. Budgetd cost of raw material purchased 1617 1617 1617 $4851 4. Budgetde direct labour cost 900 760 560 $2220 5. budgeting manufacturing overhead 620 613 603 $1836 6. Budgeted Cost of goods sold 1175 591 2071 $3837 7. Total budgeted Selling and Admn. Expenses 755 790 840 $2385