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PART1: OPERATIONAL BUDGET

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 $70. Budgeted unit sales for June, July, August, and September are 8,400, 10,000, 12,000, and 13,000 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 20% of the following months unit sales.

d. The ending raw materials inventory equals 10% of the following months raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.

e. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.

f. The direct labor wage rate is $15 per hour. Each unit of finished goods requires two direct labor-hours.

g. The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $60,000.

Additional data:

MOH is applied using DL hour as base of computation. POHR = $3 per DL hour

Fixed MOH per month is $ 27,000, noncash MOH cost per month is $8,000

Company policy determines the minimum cash balance for each month is $100,000

If there is a cash shortage, Morganton will borrow at the beginning of the month, in multiples of $20,000, at an interest rate of 12% annually, calculated from the principal amount to be repaid (repayment).

In the following month, any excess cash will be used to pay off the principal in multiples of $10,000. Repayment and interest payments are made at the end of the month. Beginning Cash Balance (as of June 1) $50,000,

Required:

For the month June, July, and August, prepare :

A. Sales Budget

B. Production Budget

C. Direct Materials Budget

D. Direct Labor Budget

E. Manufacturing Overhead Budget

F. Sales & Administration Expense Budget

G. Ending Inventory of Finished Good Budget as of Aug 31

H. Cash Budget (support your calculation with Schedule of Cash Collection and Schedule of Cash Payment) I. Budgeted Income Statement as of Aug 31

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