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Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming 5 months follow: 40,000 January February March 50,000 60,000 60,000 62,000 April May The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each month is 80% of the next month's sales. b. The data on materials used are as follows: Direct Material Per-Unit Usage DM Unit Cost ($) Metal 10 lbs. Components Inventory policy dictates that sufficient 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 material on hand on December 31 of the prior year. c. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Variable-Cost Component ($) Component ($) Supplies 1.00 Power 0.50 Maintenance 30,000 0.40 Supervision 16,000 Depreciation 200,000 Taxes 12,000 Other 80,000 0.50 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Variable Costs ($) Costs ($) Salaries 50,000 Commissions 2.00 Depreciation 40,000 Shipping 1.00 Other 20,000 0.60 f. The unit selling price of the subassembly is $205. g. 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. 1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.) a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Sales Budget For the Quarter Ended March 31 January February March Total Units 40,000 50.000 60.000 Selling price $ 205 S 205 S 205 S Sales $ 4,200,000 $10,250,000 $ 12,300,000 $30,750,000 Feedback Check My Work Correct b. Schedule 2: Production Budget. Sales Desired ending inventory Total needs Less: Beginning inventory Units to be produced Allison Manufacturing Production Budget For the Quarter Ended March 31 January February March 40,000 50,000 60,000 40,000 48,000 48,000 80,000 98,000 108,000 32,000 40,000 48,000 48,000 58,000 60,000 32.000 166,000 Feedback Check My Work Correct C. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Direct Materials Purchases Budget For the Quarter Ended March 31 January Metal January Components February Metal February Components March Metal Units to be produced 48.000 48.000 58,000 58,000 60.000 Direct materials per unit 6 10 Production needs 480.000 288.000 580.000 148 / 10 600.000 Desired ending inventory 290.000 174.000 300,000 180.000 308,000 Total needs 770,000 462,000 880,000 528,000 908,000 March Components Total Metal Total Components 60,000 March Components Total Metal Total Components 60,000 c. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Direct Materials Purchases Budget For the Quarter Ended March 31 January Metal January Components February Metal February Components March Metal Units to be produced 48,000 48,000 58,000 58,000 60.000 Direct materials per unit 10 101 10 Production needs 480.000 288.000 580.000 148.000 600,000 Desired ending inventory 290,000 174,00V 300,000 308,000 Total needs 770,000 462.000 890,000 908,000 Less: Beginning inventory 240,000 144.000 290,000 300,000 Direct materials to be purchased 530,000 1 318,000 590,000 608,000 Cost per unit Total cost $ 4,240,000 4.720,000 $ 1,770,000 4,864,000 360,000 184,800 544.800 190,000 364,800 $ 1,824,000 Feedback Check My Work Partially correct d. Schedule 4: Direct Labor Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Direct Labor Budget For the Quarter Ended March 31 January February March Total Units to be produced 48,000 58,000 60.000 166,000 Direct labor time per unit (hours) Total hours needed 144,000 174,000 180.000 498,000 Cost per hour $ 14.25 S 14.25 14.25 s Total cost 2.052,000 $ 2,479,500 $ 2,565,000 $ 7,096,500 e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Total Allison Manufacturing Overhead Budget For the Quarter Ended March 31 January February March 144,000 174,000 180,000 2.40 $ 2. 4 2.4 2.4 345,600 $ 417,600 432,000 338,000 338,000 338,000 498.000 Budgeted direct labor hours Variable overhead rate $ Budgeted variable overhead $ Budgeted fixed overhead Total overhead $ 2.4 1.195,200 1.014,000 683,600 $ 755,600 $ 770,000 $ 2.209,200 Feedback Check My Work Correct f. Schedule 6: Selling and Administrative Expenses Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Selling and Administrative Expenses Budget For the Quarter Ended March 31 January February March Total Planned sales 40,000 50,000 60,000 150,000 Variable selling and administrative expenses per unit $ 3.6 3.6 Total variable expense $ 144,000 $ 190,000 $ 216,000 $ 540,000 Fixed selling and administrative expenses: Salaries 50,000 $ 50,000 $ 50,000 $ 150,000 Depreciation 40,000 40,000 1 40,000 120,000 Other 20,000 20,000 20,000 60,000 Total fixed expenses 110,000 $ 110,000 $ 110,000 $ 330,000 Total selling and administrative expenses s 254,000 $290,000 $ 326,000 870,000 Feedback Check My Work Correct 9. Schedule 7: Ending Finished Goods Inventory Budget. If required, round amounts to the nearest cent. Allison Manufacturing Ending Finished Goods Inventory Budget For the Quarter Ended March 31 Unit cost computation: Direct materials: Metal Components Direct labor Overhead Variable 110 Fixed Total unit cost 166.06 7.970,880 Finished goods inventory $ Feedback Check My Work Correct h. Schedule 8: Cost of Goods Sold Budget, Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 Direct materials Metal $ 13.280,000 Components 4.980,000 Sl 18.260.000 Direct labor used Overhead 2.209.200 Budgeted manufacturing costs 27.565.700 Add: Beginning finished goods 5.313.920 Cost of goods available for sale 12.579.620 Less: Ending finished goods 7,970 RSD Budgeted cost of goods sold $ 24,908.140 i. Schedule 9: Budgeted Income Statement. Use a minus sign to indicate a negative amount. Allison Manufacturing Budgeted Income Statement For the Quarter Ended March 31 Sales 30.750.000 Less: Cost of goods sold 24.COR.740 Gross margin 5.841.260 Less: Selling and administrative expenses L 870,000 Income before taxes 4,971,260 Feedback Check My Work Correct j. Schedule 10: Cash Budget. If an amount is zero, enter "O". Use a minus sign to enter a negative amount. Allison Manufacturing Cash Budget For the Quarter Ended March 31 January February March Total 400.000 5 50.000 284,900 XS .200,000 10,250,00 12,300,000 30.750.00 8,600,000 $10,300,00 $ 12,584,900 X $ 31,150,00 3.830.000 490.000 $ 6688.000 19.000.00 2.052.000 2.479.500 2.565.000 41,600 570,000 Beginning balance $ Cash receipts 1 Cash available $ Less Disbursements: Purchases s Direct labor Overhead Selling & admin. Total $ Tentative ending balance $ Borrowed/repaid Interest paid Ending balance 5 214,000 250.000 286.000 Sl 9,775,100 $ 10.109,000 8.579.600 219,600 29,600 X $ 284,900 X s 2,235.900 29.600 x 50.000 $ 284,900 X $ 1,960,908 X $2,295 Feedback Cho My We Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming 5 months follow: 40,000 January February March 50,000 60,000 60,000 62,000 April May The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each month is 80% of the next month's sales. b. The data on materials used are as follows: Direct Material Per-Unit Usage DM Unit Cost ($) Metal 10 lbs. Components Inventory policy dictates that sufficient 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 material on hand on December 31 of the prior year. c. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Variable-Cost Component ($) Component ($) Supplies 1.00 Power 0.50 Maintenance 30,000 0.40 Supervision 16,000 Depreciation 200,000 Taxes 12,000 Other 80,000 0.50 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Variable Costs ($) Costs ($) Salaries 50,000 Commissions 2.00 Depreciation 40,000 Shipping 1.00 Other 20,000 0.60 f. The unit selling price of the subassembly is $205. g. 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. 1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.) a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Sales Budget For the Quarter Ended March 31 January February March Total Units 40,000 50.000 60.000 Selling price $ 205 S 205 S 205 S Sales $ 4,200,000 $10,250,000 $ 12,300,000 $30,750,000 Feedback Check My Work Correct b. Schedule 2: Production Budget. Sales Desired ending inventory Total needs Less: Beginning inventory Units to be produced Allison Manufacturing Production Budget For the Quarter Ended March 31 January February March 40,000 50,000 60,000 40,000 48,000 48,000 80,000 98,000 108,000 32,000 40,000 48,000 48,000 58,000 60,000 32.000 166,000 Feedback Check My Work Correct C. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Direct Materials Purchases Budget For the Quarter Ended March 31 January Metal January Components February Metal February Components March Metal Units to be produced 48.000 48.000 58,000 58,000 60.000 Direct materials per unit 6 10 Production needs 480.000 288.000 580.000 148 / 10 600.000 Desired ending inventory 290.000 174.000 300,000 180.000 308,000 Total needs 770,000 462,000 880,000 528,000 908,000 March Components Total Metal Total Components 60,000 March Components Total Metal Total Components 60,000 c. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Direct Materials Purchases Budget For the Quarter Ended March 31 January Metal January Components February Metal February Components March Metal Units to be produced 48,000 48,000 58,000 58,000 60.000 Direct materials per unit 10 101 10 Production needs 480.000 288.000 580.000 148.000 600,000 Desired ending inventory 290,000 174,00V 300,000 308,000 Total needs 770,000 462.000 890,000 908,000 Less: Beginning inventory 240,000 144.000 290,000 300,000 Direct materials to be purchased 530,000 1 318,000 590,000 608,000 Cost per unit Total cost $ 4,240,000 4.720,000 $ 1,770,000 4,864,000 360,000 184,800 544.800 190,000 364,800 $ 1,824,000 Feedback Check My Work Partially correct d. Schedule 4: Direct Labor Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Direct Labor Budget For the Quarter Ended March 31 January February March Total Units to be produced 48,000 58,000 60.000 166,000 Direct labor time per unit (hours) Total hours needed 144,000 174,000 180.000 498,000 Cost per hour $ 14.25 S 14.25 14.25 s Total cost 2.052,000 $ 2,479,500 $ 2,565,000 $ 7,096,500 e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Total Allison Manufacturing Overhead Budget For the Quarter Ended March 31 January February March 144,000 174,000 180,000 2.40 $ 2. 4 2.4 2.4 345,600 $ 417,600 432,000 338,000 338,000 338,000 498.000 Budgeted direct labor hours Variable overhead rate $ Budgeted variable overhead $ Budgeted fixed overhead Total overhead $ 2.4 1.195,200 1.014,000 683,600 $ 755,600 $ 770,000 $ 2.209,200 Feedback Check My Work Correct f. Schedule 6: Selling and Administrative Expenses Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Selling and Administrative Expenses Budget For the Quarter Ended March 31 January February March Total Planned sales 40,000 50,000 60,000 150,000 Variable selling and administrative expenses per unit $ 3.6 3.6 Total variable expense $ 144,000 $ 190,000 $ 216,000 $ 540,000 Fixed selling and administrative expenses: Salaries 50,000 $ 50,000 $ 50,000 $ 150,000 Depreciation 40,000 40,000 1 40,000 120,000 Other 20,000 20,000 20,000 60,000 Total fixed expenses 110,000 $ 110,000 $ 110,000 $ 330,000 Total selling and administrative expenses s 254,000 $290,000 $ 326,000 870,000 Feedback Check My Work Correct 9. Schedule 7: Ending Finished Goods Inventory Budget. If required, round amounts to the nearest cent. Allison Manufacturing Ending Finished Goods Inventory Budget For the Quarter Ended March 31 Unit cost computation: Direct materials: Metal Components Direct labor Overhead Variable 110 Fixed Total unit cost 166.06 7.970,880 Finished goods inventory $ Feedback Check My Work Correct h. Schedule 8: Cost of Goods Sold Budget, Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 Direct materials Metal $ 13.280,000 Components 4.980,000 Sl 18.260.000 Direct labor used Overhead 2.209.200 Budgeted manufacturing costs 27.565.700 Add: Beginning finished goods 5.313.920 Cost of goods available for sale 12.579.620 Less: Ending finished goods 7,970 RSD Budgeted cost of goods sold $ 24,908.140 i. Schedule 9: Budgeted Income Statement. Use a minus sign to indicate a negative amount. Allison Manufacturing Budgeted Income Statement For the Quarter Ended March 31 Sales 30.750.000 Less: Cost of goods sold 24.COR.740 Gross margin 5.841.260 Less: Selling and administrative expenses L 870,000 Income before taxes 4,971,260 Feedback Check My Work Correct j. Schedule 10: Cash Budget. If an amount is zero, enter "O". Use a minus sign to enter a negative amount. Allison Manufacturing Cash Budget For the Quarter Ended March 31 January February March Total 400.000 5 50.000 284,900 XS .200,000 10,250,00 12,300,000 30.750.00 8,600,000 $10,300,00 $ 12,584,900 X $ 31,150,00 3.830.000 490.000 $ 6688.000 19.000.00 2.052.000 2.479.500 2.565.000 41,600 570,000 Beginning balance $ Cash receipts 1 Cash available $ Less Disbursements: Purchases s Direct labor Overhead Selling & admin. Total $ Tentative ending balance $ Borrowed/repaid Interest paid Ending balance 5 214,000 250.000 286.000 Sl 9,775,100 $ 10.109,000 8.579.600 219,600 29,600 X $ 284,900 X s 2,235.900 29.600 x 50.000 $ 284,900 X $ 1,960,908 X $2,295 Feedback Cho My We