2. The data on materials used are as follows: Direct Per-Unit DM Unit Material Egg Cost Metal 10 lbs. $8 Components 6 5 Inventory policy dictates that suf- ficient materials be on hand at the end of the month to produce 50% of the next month's production needs. This is exactly the amount of mate- rial on hand on December 31 of the prior year. 3. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25. 4. Overhead each month is esti- mated using a exible budget for- mula. (Note: Activity is measured in direct labor hours.) 4. Overhead each month is esti- mated using a flexible budget for- mula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Component Supplies Power Maintenance $30,000 Supervision 16,000 Depreciation 200,000 Taxes 12,000 Other 80,0005. Monthly selling and administra- tive expenses are also estimated us- ing a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Costs Salaries $50,000 Commission S Depreciation 40,000 Shipping Other 20,0006. The unit selling price of the sub- assembly is $205. All sales and purchases are for cash. The cash balance on January 1 equals $400,000. The firm requires a minimum ending balance of $50,000. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 12% per annum. No money is owed at the beginning of January. Required: 1. Prepare a monthly operating bud get for the first quarter with the fol- lowing schedules. (Note: Assume that there is no change in work-in- process inventories.) 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expenses budget 7. Ending finished goods inven tory budget 8. Cost of goods sold budget 9. Budgeted income statement Answer 1 Check Figure: Budgeted in- come before taxes = $4,971,260 10. Cash budget Answer 1 Check Figure: Cash budget ending balance (March) = $2,686,004 Allison Manufacturing produces a subassembly used in the production of jet EXCEL aircraft engines. The assembly is sold to engine manufacturers and aircraft main- tenance facilities. Projected sales in units for the coming 5 months follow: January 40,000 February 50,000 March 60,000 April 60,000 May 62,000 The following data pertain to produc- tion policies and manufacturing specific cations followed by Allison Manufacturing: 1. Finished goods inventory on January 1 is 32,000 units, each cost- ing $166.06. The desired ending in- ventory for each month is 80% of the next month's sales