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 13,900 April 16,000 May 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 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 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 Variable Cost Component 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 Fixed Costs Variable Costs Salaries $ 88,600 flexible budgeting formula. (Activity is measured in units sold.) Commissions $1.40 Depreciation 25,000 Shipping 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. Required: Prepare a monthly operating budget for the first quarter with the following schedules: 1. Sales budget January February March Total Units 10,000 10,600 13,900 34,500 Unit selling price 110 110 110 110 Sales 1,100,000 1,166,000 1,529,000 3,795,000 Feedback Check My Work 2. Production budget January February March Total Unit sales 10,000 10,600 13,900 34,500 Desired ending inventory 2,120 2,780 3,200 3,200 Total needed 12,120 13,380 17,100 37,700 Less: Beginning inventory 900 2,120 2,780 900 Units produced 11,220 11,260 14,320 36,800 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 11,220 11,220 11,260 11,260 14,320 14,320 36,800 36,800 Dir. mat. per unit 2 3 2 3 2 3 2 3 Production 22,440 33,660 22,520 33,780 28,640 42,960 73,600 110,400 needs Desired EI 6,756 10,134 8,592 12,888 9,900 14,850 9,900 14,850 Total needed 29,196 43,794 31,112 46,668 38,540 57,810 83,500 125,250 Less: BI 6,732 10,098 6,756 10,134 8,592 12,888 6,732 10,098 Dir. mat. to 22,464 33,696 24,356 36,534 29,948 44,922 76,768 115,152 purchase Cost per unit 4 7 4 7 4 7 7 Total purchase 89,856 $ 235,872 97,424 255,738 119,792 314,454 307,072 806,064 cost 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total 11,220 11,260 14,320 36,800 Units to be produced Direct labor time per unit (hrs.) 1.5 1.5 1.5 1.5 Total hours needed 16,830 16,890 21,480 55,200 Wages per hour 20 20 20 20 Total direct labor cost 336,600 337,800 429,600 1,104,000 Feedback Check My Work 5. Overhead budget. Round your answers to two decimal places, if required. January February March Total Budgeted direct labor hours Variable overhead rate Budgeted var. overhead Budgeted fixed overhead Total overhead cost 6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales Variable selling & administrative expense per unit Total variable expense Fixed selling & administrative expense: Salaries Depreciation Other Total fixed expenses Total selling & administrative expenses 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 Part C30 Direct labor III III Overhead: Variable Fixed Total unit cost Number of units Finished goods 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 "O". January February March Total 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 $