Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each fr
ID: 2539359 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.50 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:
March 305
April 310
May 360
June 460
July 435
August 485
Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.
Iguana, Inc., had $13,600 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 $3,600. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $210 in depreciation. During April, Iguana plans to pay $3,600 for a piece of equipment.
Required:
1. Compute the following for Iguana, Inc., for the second quarter (April, May, and June): Budgeted Sales Revenue
Budgeted Production in Units
Budgeted Cost of Raw Materials Purchases
Budgeted Direct Labor Cost
Budgeted Manufacturing Overhead
Budgeted Cost of Goods Sold
Total Budgeted Selling and Administrative Expenses.
2. Complete Iguana's budgeted income statement for quarter 2.
Explanation / Answer
Solution:
Part 1-1 – Sales Budget
Sales Budget
April
May
June
2nd Quarter Total
Budgeted Sales (Units)
310
360
460
1,130
Unit Selling Price
$30
$30
$30
$30
Budgeted Sales Revenue in dollars
$9,300
$10,800
$13,800
$33,900
Part 1-2 -- Budgeted Production in Units
Production Budget
April
May
June
2nd Quarter Total
July
Next Month's Expected Unit Sales
360
460
435
485
Ratio of inventory to future sales
40%
40%
40%
40%
Budgeted Finished Goods Ending Inventory (units)
144
184
174
194
Add: Budgeted Sales (units)
310
360
460
435
Required units of available production
454
544
634
629
Less: Budgeted Beginning Inventory (Ending Finished Goods Inventory of last month)
124
144
184
174
Units to be produced
330
400
450
1,180
455
Part 1-3 -- Budgeted Cost of Raw Materials Purchases
Raw Materials Budget
April
May
June
2nd Quarter Total
July
Production Budget (units)
330
400
450
455
Bamboo requirements per unit (in linear feet)
4
4
4
4
Total raw materials needed for production (in linear feet)
1320
1600
1800
1820
Add: Raw materials ending inventory (30% of the next months materials requirements)
480
540
546
Total materials requirements (in feet)
1800
2140
2346
Less: Raw Materials Beginning Inventory (Ending Inventory of Previous Month)
396
480
540
Total Raw materials to be purchased (in linear feet)
1404
1660
1806
4870
Raw material cost per foot
$3.50
$3.50
$3.50
$3.50
Budgeted Cost of Raw material purchases
$4,914
$5,810
$6,321
$17,045
Part 1-4 -- Budgeted Direct Labor Cost
Direct Labor Budget
April
May
June
2nd Quarter Total
Units to be produced
330
400
450
Required Direct Labor Hour per unit
0.50
0.50
0.50
Total Direct Labor Hours Required
165
200
225
Direct Labor Cost per hour
$12
$12
$12
Budgeted Direct Labor Cost
$1,980
$2,400
$2,700
$7,080
You need to fill the detail in the answer format as follows:
April
May
June
2nd Quarter Total
1. Budgeted Sales Revenue
$9,300
$10,800
$13,800
$33,900
2. Budgeted Production in Units
330
400
450
1,180
3. Budgeted Cost of Raw Materials Purchases
$4,914
$5,810
$6,321
$17,045
4. Budgeted Direct Labor Cost
$1,980
$2,400
$2,700
$7,080
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.
Sales Budget
April
May
June
2nd Quarter Total
Budgeted Sales (Units)
310
360
460
1,130
Unit Selling Price
$30
$30
$30
$30
Budgeted Sales Revenue in dollars
$9,300
$10,800
$13,800
$33,900