Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each fr
ID: 2557957 • 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.
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 $2,600. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $190 in depreciation. During April, Iguana plans to pay $3,400 for a piece of equipment.
March 295 April 290 May 340 June 440 July 415 August 465 5. Budgeted Manufacturing Overhead 6. Budgeted Cost of Goods Sold. 7. Total Budgeted Selling and Adm. Expenses 0.00Explanation / Answer
PRODUCTION BUDGET APRIL MAY JUNE QUARTER JULY Budgeted Sales Units 290 340 440 1,070 415 Add: Desired Ending Finished inventory 136 176 166 166 Total Needs 426 516 606 1,236 Less: Beginning Finished Inventory 116 136 176 116 Required Production in units 310 380 430 1,120 BUDGETED MANUFACTURING OVERHEADS APRIL MAY JUNE QUARTER Budgeted Production Units 310 380 430 1120 Variable Manufacturing Cost per unit 0.2 0.2 0.2 0.2 Total Variable Mfg OH 62 76 86 224 Fixed manufacturiing Overheads 750 750 750 2250 Total Manufacturing OH 812 826 836 2474 Less: Depreciation 190 190 190 570 Cash Disbursals for Mfh OH 622 636 646 1904 BUDGETED COST OF GOODS SOLD APRIL MAY JUNE QUARTER Budgeted Sales Units 290 340 440 1,070 Cost of Goods sold Material Cost @ $10 per unit 2900 3400 4400 10700 labour cost @ $7 per unit 2030 2380 3080 7490 Manufacturing OH 812 826 836 2474 Budgeted Cost of Goods sold 5742 6606 8316 20664 BUDGETED SELLING AND ADMIN OH APRIL MAY JUNE QUARTER Budgeted Sales Units 290 340 440 1,070 Variable Selling OH per unit 0.5 0.5 0.5 0.5 Total Variable Sselling OH 145 170 220 535 Fixed Sselling OH 800 800 800 2400 Budgeted Selling and Admin Oh 945 970 1020 2935