Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces wiring harness 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 10,600 March 13,300 April May 16,000 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: a. 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 Per-Unit Usage Unit Cost Part #K298 Part #C30 2 3 $4 7 Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satisfy 30 percent of the next month's production needs. This is exactly the amount of material on hand on January 1. c. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20. d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Fixed Cost Component Variable Cost Component Supplies $1.00 Power 0.20 Maintenance 12,600 1.10 Supervision 14,000 Depreciation 45,000 Taxes 4,300 Other 86,000 1.60 e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.) Fixed Costs Salaries $ 88,600 Variable Costs - Commissions Depreciation Shipping 25,000 $1.40 - 3.60 Other 137,000 1.60 f. The unit selling price of the wiring harness assembly is $110. g. In February, the company plans to purchase land for future expansion. The land costs $68,000. h. All sales and purchases are for cash. The cash balance on January 1 equals $62,700. The firm wants to have an ending cash balance of at least $25,000. If a cash shortage develops, sufficient cash is borrowed to cover the shortage and provide the desired ending balance. Any cash borrowed must be borrowed in $1,000 increments and is repaid the following month, as is the interest due. The interest rate is 12 percent per annum. 1. Sales budget January Units 10,000 February 10,600 March 13,300 Total 33,900 Unit selling price 110 110 110 110 Sales 1,100,000 1,166,000 1,463,000 3,729,000 2. Production budget January February March Total Unit sales 10,000 10,600 13,300 33,900 Desired ending inventory 2,120 2,660 3,200 3,700 Total needed 12,120 13,260 16,500 41,880 Less: Beginning inventory 900 2,120 2,660 5,680 Units produced 11,220 11,140 13,840 36,200 3. Direct materials purchases budget January February March Total Part K298 Part C30 Part K298 Part C30 Part K298 Part C30 Part K298 Part C30 Units produced 11,200 11,200 11,140 11,140 13,840 13,840 36,180 36,180 Dir. mat. per unit 2 3 2 3 2 3 2 3 Production needs 22,400 33,600 22,280 33,420 27,680 41,520 72,360 108,540 Desired EI 6,600 9,900 8,160 12,240 9,900 14,850 9,900 14,850 Total needed 29,000 43,500 30,160 45,240 37,100 55,650 81,500 122,250 Less: BI 6,720 10,080 6,600 9,900 8,160 12,240 6,720 10,080 Dir. mat. to purchase 22,280 33,420 23,560 35,340 28,940 43,410 74,780 112,170 Cost per unit 7 7 7 7 Total purchase cost 89,120 233,940 94,240 247,380 115,760 303,870 299,120 785,190 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced 11,220 11,140 13,840 36,200 Direct labor time per unit (hrs.) 1.50 1.50 1.50 1.50 Total hours needed 16,830 16,710 20,760 54,300 Wages per hour 20 20 20 20 Total direct labor cost 336,600 334,200 415,200 108,600 5. Overhead budget. Round your answers to two decimal places, if required. January February March Total Budgeted direct labor hours 16,830 16,710 20,760 54,300 Variable overhead rate 3.90 3.90 3.90 3.90 Budgeted var. overhead 65,637 65,169 80,964 211,770 Budgeted fixed overhead 161,900 161,900 161,900 485,700 Total overhead cost 227,537 227,069 $ 242,864 697,470 6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales 10,000 10,600 13,300 33,900 Variable selling & administrative expense per unit 6.60 6.60 6.60 6.60 Total variable expense 66,000 69,960 87,780 223,740 Fixed selling & administrative expense: Salaries 88,600 88,600 88,600 265,800 Depreciation 25,000 25,000 25,000 75,000 Other 13,700 13,700 13,700 411,000 Total fixed expenses 250,600 250,600 250,600 751,800 Total selling & administrative expenses 331,800 144,960 $ 498,780 975,540 7. Ending finished goods inventory budget. Round intermediate calculations to the nearest cent. Round your answers to the nearest cent, if required. Unit cost computation: Direct materials: Part K298 8 Part C30 21 Direct labor 30 Overhead: Variable 5.85 Fixed 13.41 Total unit cost 78.26 Number of units 3,200 Finished goods 250,432 8. Cost of goods sold budget Direct materials used Part K298 Part C30 Direct labor used Overhead Budgeted manufacturing costs Add: Beginning finished goods Goods available for sale Less: Ending finished goods Budgeted cost of goods sold 9. Budgeted income statement (ignore income taxes) Sales Less: Cost of goods sold Gross margin Less: Selling and administrative expense Income before income taxes 10. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "0". Beginning balance Cash receipts Total cash available Disbursements: Purchases DL payroll Overhead Marketing & admin Land Total disbursements Ending balance Financing: Borrowed/repaid Interest paid Ending cash balance January 62,700 February March Total 68,000 68,000