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 followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each month is 80% of the next month's sales. b. The data on materials used are as follows: Direct Material Metal Components Per-Unit Usage 10 lbs. 6 DM Unit Cost ($) 8 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 ($) Supplies 1.00 Power 0.50 Maintenance 30,000 0.40 Fixed-Cost Variable-Cost Component ($) Component ($) Supplies Power 1.00 0.50 Maintenance 30,000 0.40 Supervision 16,000 Depreciation 200,000 Taxes Other 12,000 80,000 0.50 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Salaries Commissions Depreciation Shipping Other Fixed Costs ($) 50,000 - 40,000 20,000 Variable Costs ($) 2.00 - 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 following month, as is the interest due. The interest rate is 12% per annum. No money is owed at the beginning of January. 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 Line Item Description Units to be produced Direct labor time per unit (hours) Total hours needed Cost per hour Total cost Direct Labor Budget For the Quarter Ended March 31 January 48,000 3 February 58,000 March Total 60,000 166,000 3 3 3 16,000 X 232,000 X 240,000 X 664,000 X $ 14.25 14.25 $ 14.25 $ 14.25 $2,736,000 X 3,306,000 X $ 3,420,000 X $9,462,000 X Feedback 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 Line Item Description February March Total January Budgeted direct labor hours Variable overhead rate $ Budgeted variable overhead $ Budgeted fixed overhead Total overhead Feedback 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 Line Item Description Selling and Administrative Expenses Budget For the Quarter Ended March 31 January February March Total 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 g. 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 Line Item Description Unit cost computation: Direct materials: Metal Components Direct labor Overhead: Variable Fixed Total unit cost Finished goods inventory Amount Amount h. Schedule 8: Cost of Goods Sold Budget. Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 Line Item Description Direct materials Metal 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 Amount Amount 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 Line Item Description Sales Less: Cost of goods sold Gross margin Less: Selling and administrative expenses Operating income Feedback Amount $ 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 Line Item Description Beginning balance Cash receipts Cash available Less Disbursements: Purchases Direct labor Overhead Selling and admin. Total Tentative ending balance Borrowed/repaid Interest paid Ending balance January February March Total $ $