Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each fr
ID: 2556371 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $11 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 $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,600 ($800 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $850 per month plus $0.60 per unit sold.
Iguana, Inc., had $12,800 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 $3,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $200 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.
March 300 April 300 May 350 June 450 July 425 August 475 Required Complete Iguana's budgeted income statement for quarter 2. (Round cost per unit in intermediate calculations and final answers to 2 decimal places.) IGUANA, INC Budgeted Income Statement For the Quarter Ending June 2nd Quarter Total April May June Budgeted Sales Revenue Budgeted Cost of Goods Sold 0.00 0.00 S 0.00 Budgeted Gross Margin Budgeted Selling and Administrative Expenses 0.00 S Budgeted Net Operating Income 0.00 $ 0.00 0.00 S 0.00Explanation / Answer
BUDGETED INCOME STATEMENT APRIL MAY JUNE QUARTER Budgeted sales revenue 9000 10500 13500 33000 Budgeted Cost of Goods sold Variable Manufacturing cost 5340 6230 8010 19580 Fixed manufacturing cost 800 800 800 2400 Gross Margin 2860 3470 4690 11020 Budgeted selling and Admin expense Variable Selling and admin oh 180 210 270 660 Fixed selling and admin oh 850 850 850 2550 Budgeted Net income 1830 2410 3570 7810 Note: Variable manufacturing cost per unit: Material (4 ft @ 3) 12 Labour (0.5 hour @$11) 5.5 Variable OH 0.3 Variable Cost per unit 17.8