Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each fr
ID: 2558013 • 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 $15 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 $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,000 ($500 per month) for expected production of 3,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.50 per unit sold.
Iguana, Inc., had $16,500 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 $5,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $310 in depreciation. During April, Iguana plans to pay $4,500 for a piece of equipment.
March 355 April 410 May 460 June 560 July 535 August 585 Required Compute the following for lguana, Inc., for the second quarter (April, May, and June). 2nd Quarter Total April May June $2,30013,800 6,800 42,900 1. Budgeted Sales Revenu 2. Budgeted Production in Units 3. Budgeted Cost of Raw Material Purchases 4. Budgeted Direct Labor Cost 5. Budgeted Manufacturing Overhead 6. Budgeted Cost of Goods Sold 7. Total Budgeted Selling and Adm. Expenses 430 500 550 1,480 715 % 750$ 775$2,240 $ 755 $ 780$ 830$2,365.00Explanation / Answer
Answer
Material Cost
4 feet x $3
$12
Labor Cost
0.5 hours x $15
$7.5
Variable MO
$0.5
Fixed MO
$2
TOTAL
$ 22 per unit
March
April
May
June
July
August
Expected Unit Sales (A)
355
410
460
560
535
585
1. Budgeted Sales Revenue (A x $30)
$ 10,650.00
$ 12,300.00
$ 13,800.00
$ 16,800.00
$ 16,050.00
$ 17,550.00
March
April
May
June
July
August
Expected Unit Sales (A)
355
410
460
560
535
585
Add: Expected ending Inventory
164
184
224
214
234
0
Less: Beginning Inventory
0
164
184
224
214
234
2. Budgeted Production in Units
519
430
500
550
555
351
March
April
May
June
July
August
Budgeted Production
519
430
500
550
555
351
Raw material required for above at 4 feet per unit
2076
1720
2000
2200
2220
1404
Add; Expected ending inventory
516
600
660
666
421.2
0
Less: Beginning Inventory
0
516
600
660
666
421.2
Raw material to be purchased
2592
1804
2060
2206
1975.2
982.8
3. Budgeted Cost of Raw material purchase @$3 per feet
$ 7,776.00
$ 5,412.00
$ 6,180.00
$ 6,618.00
$ 5,925.60
$ 2,948.40
March
April
May
June
July
August
Budgeted Production
519
430
500
550
555
351
Total time required @30 min per unit [in hours]
259.5
215
250
275
277.5
175.5
4. Budgeted Labor Cost at $15 per hour
$ 3,892.50
$ 3,225.00
$ 3,750.00
$ 4,125.00
$ 4,162.50
$ 2,632.50
March
April
May
June
July
August
Budgeted Production
519
430
500
550
555
351
Variable Manufacturing Overhead
$ 259.50
$ 215.00
$ 250.00
$ 275.00
$ 277.50
$ 175.50
Fixed Manufacturing Overhead
$ 500.00
$ 500.00
$ 500.00
$ 500.00
$ 500.00
$ 500.00
5. Budgeted Manufacturing Overhead
$ 759.50
$ 715.00
$ 750.00
$ 775.00
$ 777.50
$ 675.50
March
April
May
June
July
August
Units Sold
355
410
460
560
535
585
6. Cost of Goods Sold at $22
$ 7,810.00
$ 9,020.00
$ 10,120.00
$ 12,320.00
$ 11,770.00
$ 12,870.00
March
April
May
June
July
August
Units Sold
355
410
460
560
535
585
variable Selling & Admn expenses
$ 177.50
$ 205.00
$ 230.00
$ 280.00
$ 267.50
$ 292.50
Fixed Selling & Administrative expenses
$ 550.00
$ 550.00
$ 550.00
$ 550.00
$ 550.00
$ 550.00
7. Totall Budgeted Selling & Admin expenses
$ 727.50
$ 755.00
$ 780.00
$ 830.00
$ 817.50
$ 842.50
Material Cost
4 feet x $3
$12
Labor Cost
0.5 hours x $15
$7.5
Variable MO
$0.5
Fixed MO
$2
TOTAL
$ 22 per unit