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 50,000 March 60,000 April 60,000 May 62,000 The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: 1 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 $14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Component ($) Variable-Cost Component ($) Supplies 1.00 Power 0.50 Maintenance 30,000 0.40 Supervision 16,000 Depreciation 200,000 12,000 Taxes Other 80,000 0.50 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Variable Costs ($) Costs ($) Salaries 50,000 Commissions Depreciation 40,000 Shipping 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. 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 Units 40,000 5,000 60,000 Selling price $ 205 205 $ 205 Sales $ ,200,000 $10,250,000 $12,300,000 150,000 205 $30,750,000 Feedback Check My Work Correct b. Schedule 2: Production Budget. Allison Manufacturing Production Budget For the Quarter Ended March 31 January February March 40,000 50,000 600,000 Sales Desired ending inventory 40,000 48,000 48,000 Total needs 32,000 48. Less: Beginning inventory Units to be produced 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 March Components Total Metal Total Components 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 + + + + # 1 | 7 LA LA A A A A Total cost Feedback Check My Work Incorrect 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 Units to be produced Direct labor time per unit (hours) Total hours needed Cost per hour Total cost Feedback Check My Work Incorrect 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 February March Budgeted direct labor hours Variable overhead rate Budgeted variable overhead Budgeted fixed overhead Total overhead 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 Variable selling and administrative expenses per unit $i 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 Unit cost computation: Direct materials: Metal Components Direct labor Overhead: Variable Qu ndio Fixed | Total unit cost | Finished goods inventory h. Schedule 8: Cost of Goods Sold Budget. Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 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 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 Less: Cost of goods sold Gross margin Less: Selling and administrative expenses Income before taxes