Iguana, Inc., manufactures bamboo picture frames that sell for $23 each. Each fr

ID: 2467177 • Letter: I

Question

Iguana, Inc., manufactures bamboo picture frames that sell for $23 each. Each frame requires 5 linear feet of bamboo, which costs $1.80 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $9.00 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 30 percent of next month's sales. Ending raw materials inventory should be 20 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: Variable manufacturing overhead is incurred at a rate of $.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,600.00 ($550.00 per month) for expected production of 4,116 units for the year. Selling and administrative expenses are estimated at $610.00 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 1 decimal place for direct labor hours and to 2 decimal places for per unit costs.)

Explanation / Answer

April

May

June

Quarter

Budgeted sales revenue

5,750

7,360

9,660

22,770

Production units

271

350

408

1029

Cost of raw materials

2,581.20

3,254.40

3,643.20

9,478.80

Direct labor cost

6,453

8,136

9,108

23,697

Manufacturing overhead

980.20

1092.40

1157.20

3229.80

Cost of goods sold

3850

4928

6468

15,246

Selling and adm

735

770

820

2325

Sales revenue = units * sale price

Production units = sale units + ending inventory – opening inventory

Raw materials cost = production units * material required per foot

Total materials + closing inventory – opening inventory

Multipled by total cost

Cost of good sold = all cost per unit * unit sales