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. 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.
2. The data on materials used are as follows:

   Direct Material	Per-Unit Usage		DM Unit Cost ($)
   Metal	10 lbs.		8
   Components	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.
3. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25.
4. 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

5. 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			2.00
   Depreciation	40,000
   Shipping			1.00
   Other	20,000		0.60

6. The unit selling price of the subassembly is $205.
7. 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. Can Someone please help me with parts h. I. and J.?

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 $ 205 $ 205 205 Selling price $ Sales $ 205 8,200,000 205 12,300,000 $ $ $ 10,250,000 $ 30,750,000 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 80,000 98,000 108,000 198,000 Less: Beginning inventory 32,000 40,000 48,000 32,000 Units to be produced 48,000 58,000 60,000 166,000 Direct Materials Purchases Budget For the Quarter Ended March 31 February February Metal March Metal Components January Metal January Components March Components Total Metal Total Components 48,000 48,000 58,000 58,000 58,000 60,000 60,000 166,000 166,000 10 6 10 6 10 6 10 480,000 288,000 580,000 348,000 600,000 360,000 1,660,000 996,000 290,000 174,000 300,000 180,000 308,000 184,800 308,000 184,800 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 770,000 462,000 880,000 528,000 908,000 544,800 1,968,000 1,180,800 240,000 144,000 290,000 174,000 300,000 180,000 240,000 144,000 530,000 318,000 590,000 354,000 608,000 364,800 1,728,000 1,036,800 $ 8 $ 5 $ 8 $ 5 $ 8 $ 5 $ 8 $ $ 4,240,000 $ 1,590,000 $ 4,720,000 $ 1,770,000 $ 4,864,000 $ 1,824,000 $ 13,824,000 $ 5,184,000 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 Total Units to be produced 48,000 58,000 60,000 166,000 Direct labor time per unit (hours) Total hours needed 498,000 Cost per hour 144,000 14.25 2,052,000 174,000 14.25 2,479,500 14.25 $ $ 14.25 180,000 14.25 2,565,000 | $ $ $ $ Total cost $ 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 March Total Budgeted direct labor hours 144,000 174,000 180,000 498,000 Variable overhead rate 2.40 $ 2.40 $ 2.40 $ 2.40 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 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 50,000 60,000 150,000 Variable selling and administrative expenses per unit $1 3.6 $ 3.6 3.6 $ 3.6 3.6 3.6 180,000 $ $ $ 144,000 $ 216,000 $ 540,000 Total variable expense Fixed selling and administrative expenses: Salaries 50,000 50,000 $ 50,000 $ 150,000 Depreciation 40,000 40,000 40,000 120,000 Other 20,000 20,000 20,000 60,000 Total fixed expenses 110,000 110,000 $ 110,000 $ 330,000 Total selling and administrative expenses 254,000 290,000 $ 326,000 $ 87 Accounting numeric field 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 $ 80 Components 30 $ 110 42.75 Direct labor Overhead: Variable 7.20 Fixed 6.11 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 $ 13,824,000 Components 5,184,000 X $ Direct labor used 7,096,500 Overhead 2,209,200 Budgeted manufacturing costs Add: Beginning finished goods Cost of goods available for sale Less: Ending finished goods 7,970,880 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 $ 30,750,000 Sales Less: Cost of goods sold Gross margin Less: Selling and administrative expenses 870,000 Income before taxes 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 March Total Beginning balance Cash receipts 8,200,000 10,250,000 Cash available 8,600,000 10,300,000 $ Less Disbursements: Purchases $ 5920 5,830,000 6,490,000 Direct labor 2,052,000 2,479,500 Overhead Selling & admin. TA A Total A Tentative ending balance A Borrowed/repaid Interest paid Ending balance