Operating Budget Comprehensive Analysis Ponderosa, Inc. produces wining hamess assemblies used in the production of semi-trailer trucks, The wiring harness assemblies are sold to various truck manufacturers around the world. Projected sales in units for the coming five months are given below January 10,000 February 10.500 March 12,200 April 16,000 May 18.500 The folowing data pertain to production policies and manufacturing specific bons followed by Ponderosa 5. Finished goods inventory on January 1 is 900 units. The desired ending inventory for each month is 20 percent of the next month's sales. b. The data on materials used are as follows Direct Material PerUnit Usage Unit Cost Part=290 2 Part 30 3 7 Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satuly 30 percent of the next month's production needs. This is exactly the amount of material on hand on January 1 c. The direct laborused per unit of output is one and one half hours. The average direct labor cost per hour # $20. . Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Fixed Cost Variable Cout Component Component Supplies $1.00 Power 0.20 Maintenance 12.600 1.10 Supervision 14.000 Depreciation 45,000 Taxes 4.300 Other 36.000 1.60 4. Monthly selling and administrative expenses are also estimated uaing a fleable budgeting formula. (Activity manured in units solt.) Fixed Costs Variable Costs Salanes 568,600 Commissions Depreciation 25.000 Shipping 3.60 Other 137.000 1.60 f. The unit selling one of the waiting hamess assembly is 5110 g. In February the company plans to purchase and for future expansion. The land costs $68.000 All sales and purchases are for cash. The cash balance on January al 562.900. The firm wants to have an ending cash balance of at least 525,000, a cash shortage develope sul cient cash is borreved to cover the shortage and provide the desired anding balance. A co bord must be borrowed io $1.000 increments and is read the following month, as is the interest due. The interest rates 12 percent per annum 1. Sales budget January February March Total Units 10,000 10,500 13,200 33,700 Unit selling price 110 110 110 110 Sales 1,100,000 1,155,000 1,452,000 3,707,000 Feedback Check My Work See Cornerstone 8.1. 2. Production budget January February March Total Unit sales 10,000 10,500 13,200 33.700 Desired ending inventory 2,100 2,640 3,200 3,200 Total needed 12,100 13,140 16,400 36,900 Less: Beginning inventory 900 2,100 2,640 900 Units produced 11,200 11,040 13,760 36,000 3. Direct materials purchases budget January February March Total Part 298 Part 30 Part 298 Parto Part 29 Part 298 Part 10 Units produced 11.200 11.200 11,040 11,040 13,760 13.760 36,000 16,000 Oirat per unit 27 3 3 Production needs 22.400 33,600 22,080 33,120 27.520 41,280 72.000 100,000 Desired Et 9.900 Total needed 37,420 V Less: 81 6,720 10,000 6,624 9,936 8,256 12,384 Dit to purch Cost per unit 3 To purchase Co 10. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "01. January February March Total Beginning balance 62,900 62,900 Cash receipts 1,100,000 1,155,000 1,452,000 3,707,000 1,162,900 3,769,900 Total cash available Disbursements: Purchases DL payroll 336,000 331,200 412,800 1,080,000 Overhead Marketing & admin Land 68,000 68,000 Total disbursements Ending balance Financing: Borrowed/repaid Interest paid 0 Ending cash balance