Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each fr
ID: 2557331 • Letter: I
Question
Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14 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 $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,000 ($750 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $800 per month plus $0.50 per unit sold.
Iguana, Inc., had $11,800 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.
Explanation / Answer
Solution:
April
May
June
2nd Quarter
1)
Budgeted Sales Revenue (Refer Part 1)
$8,700
$10,200
$13,200
$32,100
2)
Budgeted Production in Units (Refer Part2)
116
136
176
428
3)
Budgeted Cost of Raw material purchases (Refer Part 3)
$3,310
$3,950
$4,315
$11,575
4)
Budgeted Direct Labor Cost (Refer Part 4)
$2,170
$2,660
$3,010
$7,840
Refer below working
Part 1 --- Sales Revenue
Budgeted Sales Revenue
April
May
June
2nd Quarter
Sales Units
290
340
440
1070
Unit Selling Price
$30
$30
$30
$30
Budgeted Sales Revenue in dollars
$8,700
$10,200
$13,200
$32,100
Part 2 --- Budgeted Production in Units
Budgeted Production In Units
March
April
May
June
July
August
Budgeted Sales Units (Frames)
295
290
340
440
415
465
Add: Ending Finished Goods Inventory (40% of next month's sales)
116
136
176
166
186
Total Needs
411
426
516
606
601
Less: Beginning Finished Goods Inventory (ending inventory of last month)
118
116
136
176
166
Budgeted Production Units (frames)
293
310
380
430
435
Part 3 ---
Budgeted Cost of Raw Materials Purchases
Budgeted Production Units (frames) (Refer Part 2)
293
310
380
430
435
Required Raw material per frame (linear feet)
4
4
4
4
4
Total Required Raw Material for Production (Linear feet)
1172
1240
1520
1720
1740
Add: Desired Ending Raw Material Inventory (30% of next month's production need)
372
456
516
522
0
Less: Estimated Beginning Raw material inventory (ending inventory of last month)
372
456
516
522
Total Budgeted Purchases Raw Material (linearfeet)
1324
1580
1726
1218
Cost per foot
$2.50
$2.50
$2.50
$2.50
Total Budgeted Purchases in dollars
$3,310
$3,950
$4,315
$3,045
Part 4 –
Budgeted Direct Labor Cost
April
May
June
2nd Quarter
Budgeted Production Units (Frames) (Refer Part 2)
310.00
380.00
430.00
1120.00
Required Labor Hour per frame
0.50
0.50
0.50
0.50
Total Required Labor Hours
155.00
190.00
215.00
560.00
Labor Rate per hour
$14.00
$14.00
$14.00
$14.00
Labor Cost Budget
$2,170.00
$2,660.00
$3,010.00
$7,840.00
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Pls ask separate question for remaining parts.
April
May
June
2nd Quarter
1)
Budgeted Sales Revenue (Refer Part 1)
$8,700
$10,200
$13,200
$32,100
2)
Budgeted Production in Units (Refer Part2)
116
136
176
428
3)
Budgeted Cost of Raw material purchases (Refer Part 3)
$3,310
$3,950
$4,315
$11,575
4)
Budgeted Direct Labor Cost (Refer Part 4)
$2,170
$2,660
$3,010
$7,840