Question
ABC, Inc., produces wiring harness assemblies used in the production of semi-trailer trucks. The wiring harness assemblies are sold to various truck manufacturers around the
ABC, Inc., produces wiring harness assemblies used in the production of semi-trailer trucks. The wiring harness assemblies are sold to various truck manufacturers around the world. Projected sales in units for the coming five months are given below.
January | 10,000 |
February | 10,500 |
March | 13,000 |
April | 16,000 |
May | 18,500 |
The following data pertain to production policies and manufacturing specifications followed by Ponderosa:
Finished goods inventory on January 1 is 900 units. The desired ending inventory for each month is 20 percent of the next months sales.
The data on materials used are as follows:
Direct Material Per-Unit Usage Part #K298 2 |
Unit Cost $4 |
Part #C30 |
3 |
7 |
Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satisfy 30 percent of the next months production needs. This is exactly the amount of material on hand on January 1.
The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.
Supplies |
Fixed Cost Component Variable Cost Component $ $1.00 |
Power |
0.20 |
Maintenance |
12,500 |
1.10 |
Supervision |
14,000 |
Depreciation |
45,000 |
Taxes |
4,300 |
Other |
86,000 |
1.60 |
Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)
Salaries |
Fixed Costs Variable Costs $88,500 |
Commissions |
$1.40 |
Depreciation |
25,000 |
Shipping |
3.60 |
Other |
137,000 |
1.60 |
Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)
The unit selling price of the wiring harness assembly is $110.
In February, the company plans to purchase land for future expansion. The land costs 88,000.
All sales and purchases are for cash. The cash balance on January 1 equals $162,900.
REQUIRED:
Prepare a monthly operating budget for the first quarter with the following schedules:
Sales budget
Production budget
Direct materials purchases budget
Direct labor budget
Overhead budget
Selling and administrative expense budget
Ending finished goods inventory budget
Cost of goods sold budget
Budgeted income statement (ignore income taxes)
Cash budgettthis is one continuous question
1 ABC Company 2 Sales Budget 3 4 5 Units to Sale Price per Unit Total Sales $ \begin{tabular}{c} \hline 8 \\ \hline 9 \\ \hline 10 \\ \hline 11 \\ \hline 12 \\ \hline 13 \\ \hline 14 \\ \hline 15 \\ \hline 16 \\ \hline 17 \\ \hline 18 \\ \hline 19 \\ \hline 20 \\ \hline 21 \\ \hline 22 \\ \hline 23 \\ \hline 24 \\ \hline 25 \\ \hline 26 \\ \hline 27 \\ \hline 28 \\ \hline \end{tabular} F G H K M N O P Q R S T L Feb Mar Apr May Total ABC Company Production Budget Feb Mar Apr May Total Units to Sale Plus: E. Inventory Less: B. Inventory Units to Produce Jan Mar t Sales \& Production Direct Material Puchase \begin{tabular}{l|l|l} DL&FOH & S&A & E FG Inventory \end{tabular} Cost of Goods Sold Cash Budget B C D E F G H K L M N R S T ABC Company Direct Material Purchase Budget Jar March Feb April Part \#K298 Total Part \#C30 Part \#K298 Part \#C30 Units to Produce \# of material needed Total Materials Plus: E. Inventory Less: B. Inventory Total Materials to Purchase Cost of Material per Unit Total Cost of Materials to Purchase ABC Company S \& A Budget Sales in Units Jan Feb Total Variable: Commissions Shipping Other Total Variable Fixed: Salaries Depreciation Other Total Fixed Mar G H N K \begin{tabular}{l|l} L & M \end{tabular} Q \begin{tabular}{l|l} R & S \end{tabular} T \begin{tabular}{l|l|l} U & V & W \end{tabular} Z AA Total S \& A E. FG Inventory Cost of Goods Sold Cash Budget ABC Company E. FG Inventory Budget Direct Materials: 1st Quarter (Jan, Feb, March) Part K298 Part C30 Direct Labor FOH Variable 1.53.90 Fixed 1.59.04 Total Unit Cost E. FG Inventory Total $8.00 21.00$ 29.00 5.85 computation total fixed total \# of hours per unit amt $ ABC Company Cost of Goods Sold 1st Qtr (Jan, Feb, March Direct Materials: \begin{tabular}{l|l} Part K298 71600$4 \end{tabular} Part C30 107400*\$7 Direct Labor FOH Variable Fixed Total Add: B. FG Less: E. FG Cost of Goods Sold ABC Company Cash BudgetStep by Step Solution
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