Allison manufacturing produces a subassembly used in the production of a jet aircraft engines. The assembly is sold to engine manufactures and aircraft maintenance facilities. Projected sales in units for the coming five months follow:

January 42000.00

February 52,000.00

March 57,000.00

April 60,000.00

May 62,000.00

The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing:

Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each month is 80 percent of the next months sales.

The data on materials used are as follows:

Direct Material	Per-Unit Usage	Cost per Pound
Metal	10 lbs.	$8
Components	6	5

Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50 percent of that months production needs. This is exactly the amount of material on hand on December 31 of the prior year.

The direct labor used per unit of output is three hours. The average direct labor cost per hour is $14.25.

Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)

	Fixed-Cost Component	Variable-Cost Component
Supplies		$1.00
Power		0.50
Maintenance	$30,000	0.40

	Fixed-Cost Component	Variable-Cost Component
Supervision	16,000
Depreciation	200,000
Taxes	12,000
Other	80,000	0.50

Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)

	Fixed Costs	Variable Costs
Salaries	$50,000
Commissions		$2.00
Depreciation	40,000
Shipping		1.00
Other	20,000	0.60

The unit selling price of the subassembly 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 cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. No interest is going to be charged for the cash borrowed. No money is owed at the beginning of January.

Required

Prepare a monthly operating budget for the first quarter with the following schedule: (Assume that there is no change in work-in-process inventories)

- Cost of Good Sold budget