Chapter 7 Practice Questions.docx - Chapter 7 Practice...

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Chapter 7 Practice Questions Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operations:  a. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,500,  26,000, 28,000, and 29,000 units, respectively. All sales are on credit. b. Forty percent of credit sales are collected in the month of the sale and 60% in the following month. c. The ending finished goods inventory equals 25% of the following month’s unit sales. d. The ending raw materials inventory equals 15% of the following month’s raw materials production needs. Each unit  of finished goods requires 4 pounds of raw materials. The raw materials cost $2.40 per pound. e. Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month. f. The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense  per month is $65,000. 1. What are the budgeted sales for July? The budgeted sales for July are computed as follows:      Unit sales (a)   26,0   Selling price per unit (b) $   Total sales (a)  ×  (b) $ 1,560,0 2. What are the expected cash collections for July? The expected cash collections for July are computed as follows:    July      June sales:       $570,000  ×  60% $   July sales:       $1,560,000  ×  40%       Total cash collections $ 3. What is the accounts receivable balance at the end of July?
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The accounts receivable balance at the end of July is:      July sales (a) $1,560,000    Percent uncollected (b)   60%     Accounts receivable (a)  ×  (b) $ 936,000  4. According to the production budget, how many units should be produced in July?
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