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 April 60,000 60,000 62,000 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 (5) 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 $14.25, d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Variable-Cost Component ($) Component ($) Fixed-Cost Component ($) Variable-Cost Component ($) Supplies 1.00 Power Maintenance 30,000 Supervision 16,000 Depreciation 200,000 Taxes 12,000 Other 80,000 0.50 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Variable Costs (5) Costs ($) Salaries 50,000 Commissions 2.00 Depreciation 40,000 Shipping 1.00 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 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 Total Units 40,000 50,000 60,000 150,000 Selling price 205 $ 205 S 205 Sales $ 8,200,000 $ 10,250,000 $ 12,300,000 $ 30,750,000 Feedback Check My Work Correct abadele 2 reduction Rudant - etRIST b. Schedule 2: Production Budget. Allison Manufacturing Production Budget For the Quarter Ended March 31 January February March 40,000 50,000 60,000 Total Sales 150,000 Desired ending inventory 40,000 48,000 48,000 48,000 Total needs 80,000 98.000 108,000 | 198,000 V Less: Beginning inventory ory 32,000 40,000 48,000 32,000 Units to be produced 48,000 60.000 166,000 Foodback 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 February Metal February Components March Metal January Metal March Components Total Metal Components Units to 48,000 48,000 58,000 58,000 60,000 60,000 166,000 produced January Metal January Components February Metal February Components March Metal March Components Total Metal 48,000 48,000 58,000 58,000 60,000 60,000 166,000 10 10 10 6 480,000 288,000 $80,000 UR.000 600,000 360,000 1,660,000 290,000 174,000 300,000 180,000 308,000 184,800 308,000 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 770,000 462,000 880,000 528,000 908,000 544,800 1.968,000 240,000 144,000 290,000 174,000 300,000 180,000 240,000 530,000 590,000 354,000 608,000 364,800 1,728.000 5 $8 5 $8s Total cost $ $ 4,240,000 4,240,000 $ 1,590,000 $ 4,720,000 1,770,000 $ 4,864,000 $ 1.824,000 $ 13,824,000 Feedback 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 48,000 58,000 Total 60,000 166,000 Units to be produced Direct labor time per unit (hours) Total hours needed 174,000 1000 498,000 144,000 14.25 14.25 Cost per hour 14.25 Total cost 2,052,000 $ 2,479,500 $ 2,565,000 $ 7,096,500 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 144,000 174,000 Tota Budgeted direct labor hours 180,000 498,000 Variable overhead rate 2.4 $ Budgeted variable overhead $ 345,600 417.600 $ 432,000 $ 1,195,200 Budgeted fixed overhead 338,000 338,000 338,000 1,014,000 Total overhead 683,600 $ 755,600 $ 770,000 $ 2,209,200 Feedback Check My Work Correct 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 40,000 . 60,000 150.000 Allison Manufacturing Selling and Administrative Expenses Budget For the Quarter Ended March 31 January February 40,000 50,000 Total Planned sales 0 0 0 1 150,000 Variable selling and administrative expenses per units 3.6 144,000 180.000 $ 216,000 $ 540,000 Correct Total variable expense Fixed selling and administrative expenses: Salaries 50,000 50,000 50,000 150,000 Depreciation 40.000 40,000 120,000 20.000 60,000 Other 110,000 110.000 110,000 Total fixed expenses 330,000 Total selling and administrative expenses $ 254,000 $ 290,000 $ 326,000 $ 870,000 9. Schedule 7: Ending FISITE GOODS Invencory budget. If required, round amounts to the nearest cena Allison Manufacturing Ending Finished Goods Inventory Budget For the Quarter Ended March 31 Unit cost computation: Direct materials: Metal Components Direct labor Overhead: Variable Fixed Total unit cost 166.06 Finished goods inventory 7,970,880 h. Schedule 8: Cost of Goods Sold Budget. Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31 Direct materials Metal 13,280,000 4,980,000 Components 18,260,000 Direct labor used 7,096,500 Overhead 2,209,200 27,565,700 Budgeted manufacturing costs Add: Beginning finished goods 5,313,920 Cost of goods available for sale 32,879,620 7,970,880 Less: Ending finished goods Budgeted cost of goods sold 24,908,740 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 30,750,000 Less: Cost of goods sold 24,908,740 Gross margin 5,841,260 Less: Selling and administrative expenses 870,000 Income before taxes 4,971,260 Feedback Check My Work Correct 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 January February March 400,000 $ 50,000 $ 284,900 8,200,000 10,250,000 12,300,000 X $ Beginning balance Cash receipts Total 400,000 30,750,000 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 January February 400,000 $ 50,000 $ Total March 284,900 Beginning balance 400,000 Cash receipts 8,200,000 10,250,000 12,300,000 30,750,000 Cash available 8,600,000 $ 10,300,000 12,824,900 X $ 31,150,000 Less Disbursements: Purchases $ $ 6,490,000 Direct labor 2,479,500 Overhead 5,830,000 2,052,000 483,600 214,000 8,579,600 555,600 250,000 Selling & admin Total $ $ 9,775,100 524,900 Tentative ending balance $ 20,400 29,600 Borrowed/repaid Interest paid $ 524,900 2.295,808 50,000 X X Ending balance