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	13,100
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 $62,700. 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:

10. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "0".

1. Sales budget January February March Total Units Unit selling price $ $ $ $ Sales $ $ $ 2. Production budget January February March Total Unit sales Desired ending inventory Total needed Less: Beginning inventory Units produced 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 Dir. mat. per unit Production needs Desired EI Total needed Less: BI Dir. mat. to purchase Cost per unit $ $ Total purchase cost $ 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced Direct labor time per unit (hrs.) Total hours needed Wages per hour $ $ $ Total direct labor cost $ $ 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 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 $ 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 $