eBook 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 50,000 60,000 60,000 62,000 January February March 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. 8 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 $14.25 d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Component () Component ($) Variable-Cost Supplies 1.00 Check My Work eBook Calculator Fixed-Cost Variable-Cost Component () Component (s) Supplies Power Maintenance Supervision Depreciation Taxes Other 1.00 0.50 0.40 30,000 16,000 200,000 12,000 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 Commissions Depreciation Shipping Other 50,000 2.00 40,000 1.00 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. 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 Februany Components January March Total anuary Metal February Metal March Metal Total Metal 8,000V 48,000 10 480,000 290,000 770,000 240,000 530,000 8 166,000 6 996,000 184,800 Units to be produced Direct materials per unit Production needs Desired ending inventory Total needs Less: Beginning Direct materials to be 48,000 58,000 60,000 60,000 166,000 10 10 10 1,660,000 288,000 174,000 462,000 144,000 318,000 580,000 300,000 880,000 290,000 590,000 348,000 180,000 528,000 174,000 354,000 600,000 308,000 908,000 300,000 608,000 360,000 184,800 V 544,800 180,000 | 364,800 308,000 0 240,000 144,000 1,728,000 1,036,800V 8 Cost per unit 4240,0001,590,0004141824000 13,824,0005,184,000 4,720,000 1,770,000 4,864,000 Total cost Feedback Check My Work Partially correct Check My Work 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 Total 400,000 8,200,00010,250,00012,300,00030,750,000 x $ 31,150,000 February March January Beginning balance Cash receipts Cash available Less Disbursements 8,600,000$10,300,000 o X 830,000V$6,490,0006,688,00019,008,000 2,052,000|V | 2,479,500. | 2,565,000|V | 7,096,500| Direct labor Overhead Selling & admin. Total Tentative ending balance Borrowed/repaid Interest paid 570,0001,609,200 750,000 8,579,600$9,775,10010,109,00028,463,700 2,686,300 0 555,600 483,600 214,000V 250,000 286,000 524,900 20,400 0 29,600 29,600 Ending balance50000x Feedback Check My Work