Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each fr
ID: 2543155 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 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 365 April 430 May 480 June 580 July 555 August 605 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $4,800 ($400 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $450 per month plus $0.50 per unit sold. Iguana, Inc., had $11,000 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 $3,400. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $330 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment. 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-Budgeted direct Labor cost- budgeted manufactued overhead- budgeted cost of goods sold And budgeted selling and admin expenses
Explanation / Answer
Answer a Sales Budget April May June Total Sales in Units 430 480 580 1,490 Sp Per Unit 20 20 20 20 Total Sales in $ 8,600 9,600 11,600 29,800 Frame Production Budget April May June Total Sales In units 430 480 580 1,490 Add: Closing Inventory in units 192 232 222 222 Total Needs 622 712 802 1,712 Less: opening Inventory in uints (172) (192) (232) (172) Required Production in Units 450 520 570 1,540 Raw Material Purchase Budget April May June Total Required Production in Units 450 520 570 1,540 Bamboo required per Unit in Feet 4 4 4 4 Total Bamboo required for Production 1,800 2,080 2,280 6,160 Add: Closing Raw Material Inventory 624 684 690 690 Total Needs 2,424 2,764 2,970 6,850 Less: opening Inventory in feets (540) (624) (684) (540) Raw Material Purchased in feets 1,884 2,140 2,286 6,310 Cost of raw Material per feet 2.00 2.00 2.00 2.00 Cost of raw Material Purchased 3,768 4,280 4,572 12,620 Budgeted Direct Labor Costs April May June Total Required Production in Units 450 520 570 1,540 Lab. Hour required per unit 0.50 0.50 0.50 0.50 Total Labor Hours Required 225 260 285 770 Lab. Rate per Hour 13 13 13 13 Budgeted Direct Labor Costs 2,925 3,380 3,705 10,010 Budgeted Manufacturing Overhead April May June Total Required Production in Units 450 520 570 1,540 Variable MOH per Unit 0.30 0.30 0.30 0.30 Total Variable MOH 135 156 171 462 Fixed MOH Depreciation 330 330 330 990 Other MOH 70 70 70 210 Total Fixed MOH 400 400 400 1,200 Total MOH 535 556 571 1,662 Budgeted Manufacturing Costs per Unit: Direct Materials - 4 Ft. X $2 8.00 Direct Labor - 0.50 Hrs X $13 6.50 Variable MOH 0.30 Fixed MOH - $4,800 / 4000 Units 1.20 Total Budgted Manufacturing Cost per Unit 16.00 Budgeted Cost of Goods Sold April May June Total No. Of Units Sold 430 480 580 1,490 Total Budgted Manufacturing Cost per Unit 16 16 16 16 Budgeted Cost of Goods Sold 6,880 7,680 9,280 23,840 Total Budgetd Selling & Admn. Expenses April May June Total No. Of Units Sold 430 480 580 1,490 Variable Selling & Admn. Exp. Per Unit 0.50 0.50 0.50 0.50 Total Variable selling & Admn. Exp. 215 240 290 745 Fixed selling & Admn. Exp. 450 450 450 1,350 Total selling & Admn. Exp. 665 690 740 2,095