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 40,000 February March April May 50,000 60,000 60,000 62,000 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 $166.06. The desired ending inventory for each month is 80% of the next month's sales. b. The data on materials used are as follows: Direct Material Metal Components Per-Unit Usage DM Unit Cost ($) 10 lbs. 8 6 5 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 $14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Component ($) Variable-Cost Component ($) Supplies 1.00 Power 0.50 Maintenance 30,000 0.40 Supervision 16,000 Depreciation 200,000 Taxes 12,000 Other 80,000 0.50 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Costs ($) Variable Costs ($) Salaries 50,000 Commissions Depreciation Shipping Other 20,000 2.00 40,000 1.00 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. Required: Required: 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 60,000 150,000 Selling price $ 205 205 205 205 Sales 8,200,000 10,250,000 12,300,000 30,750,000 Feedback Check My Work Correct b. Schedule 2: Production Budget. Allison Manufacturing Production Budget b. Schedule 2: Production Budget. Allison Manufacturing Production Budget For the Quarter Ended March 31 January February March Total Sales 40,000 50,000 60,000 150,000 Desired ending inventory 40,000 48,000 48,000 48,000 Total needs Less: Beginning inventory 32,000 40,000 48,000 32,000 Units to be produced 48,000 58,000 Feedback Check My Work Partially 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 Units to be produced Direct materials per unit Production needs Desired ending inventory Total needs Less: Beginning inventory Direct materials to be purchased Cost per unit Total cost January Metal January Components February Metal February Components March Metal March Components Total Metal Components Total 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 Units to be produced Direct labor time per unit (hours) Total hours needed Cost per hour Total cost Feedback Check My Work Incorrect January February March Total Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison Manufacturing Overhead Budget For the Quarter Ended March 31 January Budgeted direct labor hours Variable overhead rate Budgeted variable overhead s Budgeted fixed overhead Total overhead February March Total 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 Planned sales Variable selling and administrative expenses per unit $ Total variable expense Fixed selling and administrative expenses: Salaries Depreciation Other Total fixed expenses Total selling and administrative expenses January February March Total h. Schedule 8: Cost of Goods Sold Budget. Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 Direct materials Metal Q + Components Direct labor used Overhead Budgeted manufacturing costs Add: Beginning finished goods Cost of goods available for sale Less: Ending finished goods Budgeted cost of goods sold h. Schedule 8: Cost of Goods Sold Budget. Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 Direct materials Metal Q + Components Direct labor used Overhead Budgeted manufacturing costs Add: Beginning finished goods Cost of goods available for sale Less: Ending finished goods Budgeted cost of goods sold i. Schedule 9: Budgeted Income Statement. Use a minus sign to indicate a negative amount. Sales Allison Manufacturing Budgeted Income Statement For the Quarter Ended March 31 Less: Cost of goods sold Gross margin Less: Selling and administrative expenses Income before taxes $ j. Schedule 10: Cash Budget. If an amount is zero, enter "0". Use a minus sign to enter a negative amount. Allison Manufacturing Cash Budget For the Quarter Ended March 31 Beginning balance Cash receipts Cash available Less Disbursements: Purchases Direct labor Overhead Selling & admin. Total Tentative ending balance $ Borrowed/repaid Interest paid Ending balance January February March Total $