Question

Morganton Company makes one product and it provided the following information to help prepare the master budget for its 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 month�s unit sales.

(d) The ending raw materials inventory equals 10% of the following month�s 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.

- How do I find beginning inventory for the direct materials budget?