OBJECTIVE problem 9-66 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: January February March April May 40,000 50,000 60,000 60,000 62.000 The following data pertain to production policies and manufacturing specifications fol- lowed by Allison Manufacturing: 2. Finished goods inventory on January 1 is 32,000 units, cach costing $166.06. The desired ending inventory for cach month is 80% of the next month's sales. b. The data on materials used are as follows: DM Unit Cost Direct Material Meral Components Per-Unit Usage 10 lbs. 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 cach 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 80,000 0.50 Other Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Costs Variable Costs $50,000 Salaries $2.00 Commissions Depreciation 1.00 Shipping 0.60 Other 40,000 20,000 the unit selling price of the subassembly is $205. All sales and purchases are for cash. The cash balance on January 1 cquals $400,000. The firm requires a minimum ending balance of $50,000. If the firm develops a cash shortare (Continued) Chapter 9 Profit Planning and Flexible Budgets by the end of the month, sufficient cash is borrowed to co ient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash bore end of the quarter is repaid at the end of the following quarter). The interest rate per annum. No money is owed at the beginning of January. Required: - Prepare a monthly operating budget for the first quarter with the following (Note: Assume that there is no change in work-in-process inventories.) a. Sales budget b. Production budget c. Direct materials purchases budget d. Direct labor budget e. Overhead budget f. Selling and administrative expenses budget g. Ending finished goods inventory budget h. Cost of goods sold budget i. Budgeted income statement j. Cash budget ce Styles Conditional Format Formatting Table Styles For pboard 5 Font Alignment Number X 24 A & B C 48000 E F G Allison Manufacturing Sales Budget (Schedule 1) For the Quarter Ended March 31 L M N O P a Total Units * Selling price Sales January 40,000 $205 $ 8,200,000 February 50,000 $205 $ 10,250,000 March 60,000 $205 $ 12,300,000 150,000 5205 5 30,750,000 . b. Allison Manufacturing Production Budget (Schedule 2) For the Quarter Ended March 31 January 40,000 40,000 February 50,000 48,000 March 60,000 48.000 Total 150,000 48000 Sales (Schedule 1) Desired ending inventory Total needs Less: Beginning inventory Units produced Allison Manufacturing Direct Materials Purchases Budget (Schedule 3) For the Quarter Ended March 31 P9 66 LE F G H K L M N O P Q R S T AF Allison Manufacturing Direct Materials Purchases Budget (Schedule 3) For the Quarter Ended March 31 March January Components February Componen 39 40 41 42 43 44 45 46 Units to be produced (Sch. 2) Direct materials per unit Production needs Desired ending inventory Total needs Less: Beginning inventory Direct materials to be purchased Cost per unit Total cost SEED - $ - % 9 - Alignment ent Number Conditional Formats Formatting Table St Styles * BLUE - A Clipboard Font K24 x 48000 4 G H I J K L M N Allison Manufacturing Direct Labor Budget (Schedule 4) For the Quarter Ended March 31 January February Units to be produced (Sch. 2) DLH per unit Total hours needed Cost per hour Total cost Allison Manufacturing Overhead Budget (Schedule 5) For the Quarter Ended March 31 January February March Total 67 68 69 Budgeted direct labor hours (Sch 4) Variable overhead rate Budgeted vanable overhead Budgeted fixed overhead Total overhead P9 66 Clipboard 5 Font Alignment Number * 48000 K24 A : C f D B E F G H I J Allison Manufacturing Selling and Administrative Expenses Budget (Schedule 6) For the Quarter Ended March 31 January February March Total Planned sales in units (Sched. 1) Var. selling & admin. exp. per unit Total variable expense Fixed selling & admin. expenses: Salaries Depreciation Other Total fixed expenses Total selling & admin. expenses Chipboard Font Alignment Number 48000 K24 A B C D E F G H I J K L M Allison Manufacturing Ending Finished Goods Inventory Budget (Schedule 7) For March 311 Rate x Units or Hours Unit cost computation: Direct materials: Metal Components Direct labor Overhead: Variable Fixed Total unit cost Units in finished goods inventory Finished goods inventory 107 108 109 K24 48000 E F G H SAB 107 co Finished goods inventory 89= Allison Manufacturing Cost of Goods Sold Budget (Schedule 8) For the Quarter Ended March 31 Direct materials (Sched. 3): Cost Metal 90min Components Direct labor (Schedule 4) Overhead (Schedule 5) Budgeted manuf. costs Add: Beginning finished goods Goods available for sale Less: Ending finished goods (Schedule 7) Budgeted cost of goods sold Allison Manufacturing Budgeted Income Statement (Schedule 9) For the Quarter Ended March 31 Font Font Alignment Alignment El Number Chipboard K24 A B x 48000 C D E F G H I J Allison Manufacturing Budgeted Income Statement (Schedule 9) For the Quarter Ended March 31 Sales (Schedule 1) Less: Cost of goods sold (Schedule 8) Gross margin Less: Selling and admin. expenses (Sched. 6) Income before taxes Allison Manufacturing Cash Budget (Schedule 10) For the Quarter Ended March 31 January February Total Beginning balance Cash receipts Cash available Less disbursements: Purchases (Sch. 3) Direct labor (Sch. 4) Overhead (Sch. 5) Selling and admin. (Sch. 6) Total disbursements Tentative ending balance Borrowed/(repaid) Interest paid Ending balance 16112