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	10,500
March	13,600
April	16,000
May	18,500

The following data pertain to production policies and manufacturing specifications followed by Ponderosa:

1. Finished goods inventory on January 1 is 900 units. The desired ending inventory for each month is 20 percent of the next months sales.
2. The data on materials used are as follows:

   Direct Material	Per-Unit Usage	Unit Cost
   Part #K298	2	$4
   Part #C30	3	7

   Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satisfy 30 percent of the next months production needs. This is exactly the amount of material on hand on January 1.

3. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.
4. 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

5. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)

   	Fixed Costs	Variable Costs
   Salaries	$ 88,600
   Commissions		$1.40
   Depreciation	25,000
   Shipping		3.60
   Other	137,000	1.60

6. The unit selling price of the wiring harness assembly is $110.
7. In February, the company plans to purchase land for future expansion. The land costs $68,000.
8. All sales and purchases are for cash. The cash balance on January 1 equals $62,800. 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.

Required:

Prepare a monthly operating budget for the first quarter with the following schedules:

1. Sales budget

	January	February	March	Total
Units	fill in the blank eba06af81ff603c_1	fill in the blank eba06af81ff603c_2	fill in the blank eba06af81ff603c_3	fill in the blank eba06af81ff603c_4
Unit selling price	$fill in the blank eba06af81ff603c_5	$fill in the blank eba06af81ff603c_6	$fill in the blank eba06af81ff603c_7	$fill in the blank eba06af81ff603c_8
Sales	$fill in the blank eba06af81ff603c_9	$fill in the blank eba06af81ff603c_10	$fill in the blank eba06af81ff603c_11	$fill in the blank eba06af81ff603c_12

2. Production budget

	January	February	March	Total
Unit sales	fill in the blank d7737701bfd7ff9_1	fill in the blank d7737701bfd7ff9_2	fill in the blank d7737701bfd7ff9_3	fill in the blank d7737701bfd7ff9_4
Desired ending inventory	fill in the blank d7737701bfd7ff9_5	fill in the blank d7737701bfd7ff9_6	fill in the blank d7737701bfd7ff9_7	fill in the blank d7737701bfd7ff9_8
Total needed	fill in the blank d7737701bfd7ff9_9	fill in the blank d7737701bfd7ff9_10	fill in the blank d7737701bfd7ff9_11	fill in the blank d7737701bfd7ff9_12
Less: Beginning inventory	fill in the blank d7737701bfd7ff9_13	fill in the blank d7737701bfd7ff9_14	fill in the blank d7737701bfd7ff9_15	fill in the blank d7737701bfd7ff9_16
Units produced	fill in the blank d7737701bfd7ff9_17	fill in the blank d7737701bfd7ff9_18	fill in the blank d7737701bfd7ff9_19	fill in the blank d7737701bfd7ff9_20

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	fill in the blank c537ebfe001f00d_1	fill in the blank c537ebfe001f00d_2	fill in the blank c537ebfe001f00d_3	fill in the blank c537ebfe001f00d_4	fill in the blank c537ebfe001f00d_5	fill in the blank c537ebfe001f00d_6	fill in the blank c537ebfe001f00d_7	fill in the blank c537ebfe001f00d_8
Dir. mat. per unit	fill in the blank c537ebfe001f00d_9	fill in the blank c537ebfe001f00d_10	fill in the blank c537ebfe001f00d_11	fill in the blank c537ebfe001f00d_12	fill in the blank c537ebfe001f00d_13	fill in the blank c537ebfe001f00d_14	fill in the blank c537ebfe001f00d_15	fill in the blank c537ebfe001f00d_16
Production needs	fill in the blank c537ebfe001f00d_17	fill in the blank c537ebfe001f00d_18	fill in the blank c537ebfe001f00d_19	fill in the blank c537ebfe001f00d_20	fill in the blank c537ebfe001f00d_21	fill in the blank c537ebfe001f00d_22	fill in the blank c537ebfe001f00d_23	fill in the blank c537ebfe001f00d_24
Desired EI	fill in the blank c537ebfe001f00d_25	fill in the blank c537ebfe001f00d_26	fill in the blank c537ebfe001f00d_27	fill in the blank c537ebfe001f00d_28	fill in the blank c537ebfe001f00d_29	fill in the blank c537ebfe001f00d_30	fill in the blank c537ebfe001f00d_31	fill in the blank c537ebfe001f00d_32
Total needed	fill in the blank c537ebfe001f00d_33	fill in the blank c537ebfe001f00d_34	fill in the blank c537ebfe001f00d_35	fill in the blank c537ebfe001f00d_36	fill in the blank c537ebfe001f00d_37	fill in the blank c537ebfe001f00d_38	fill in the blank c537ebfe001f00d_39	fill in the blank c537ebfe001f00d_40
Less: BI	fill in the blank c537ebfe001f00d_41	fill in the blank c537ebfe001f00d_42	fill in the blank c537ebfe001f00d_43	fill in the blank c537ebfe001f00d_44	fill in the blank c537ebfe001f00d_45	fill in the blank c537ebfe001f00d_46	fill in the blank c537ebfe001f00d_47	fill in the blank c537ebfe001f00d_48
Dir. mat. to purchase	fill in the blank c537ebfe001f00d_49	fill in the blank c537ebfe001f00d_50	fill in the blank c537ebfe001f00d_51	fill in the blank c537ebfe001f00d_52	fill in the blank c537ebfe001f00d_53	fill in the blank c537ebfe001f00d_54	fill in the blank c537ebfe001f00d_55	fill in the blank c537ebfe001f00d_56
Cost per unit	$fill in the blank c537ebfe001f00d_57	$fill in the blank c537ebfe001f00d_58	$fill in the blank c537ebfe001f00d_59	$fill in the blank c537ebfe001f00d_60	$fill in the blank c537ebfe001f00d_61	$fill in the blank c537ebfe001f00d_62	$fill in the blank c537ebfe001f00d_63	$fill in the blank c537ebfe001f00d_64
Total purchase cost	$fill in the blank c537ebfe001f00d_65	$fill in the blank c537ebfe001f00d_66	$fill in the blank c537ebfe001f00d_67	$fill in the blank c537ebfe001f00d_68	$fill in the blank c537ebfe001f00d_69	$fill in the blank c537ebfe001f00d_70	$fill in the blank c537ebfe001f00d_71	$fill in the blank c537ebfe001f00d_72