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 13,900 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 14,000 Supervision 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 Variable Costs Salaries $ 88,500 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 $62,800. 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 10,000 10,500 13,900 34,400 Unit selling price 110 110 110 110 Sales 1,100,000 1,155,000 1,529,000 3,784,000 2. Production budget January February March Total Unit sales 10,000 10,500 13,900 34,400 Desired ending inventory 2,100 2,780 3,200 3,200 Total needed 12,100 13,280 17,100 37,600 Less: Beginning inventory 900 2,100 2,780 900 Units produced 11,200 11,180 14,320 36,700 Feedback Check My Work See Cornerstone 8.2. 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 11,180 11,180 14,320 14,320 36,700 36,700 Dir. mat. per unit 3 2 3 2 2 3 Production 22,400 33,600 22,360 33,540 28,640 42,960 73,400 110,100 needs Desired EI 6,708 10,062 8,592 12,888 9,900 14,850 9,900 14,850 Total needed 29,108 43,662 30,952 46,428 38,540 57,810 83,300 124,950 needs Desired EI 6,708 10,062 8,592 12,888 9,900 14,850 9,900 14,850 Total needed 29,108 43,662 30,952 46,428 38,540 57,810 83,300 124,950 Less: BI 6,720 10,080 6,708 10,062 8,592 12,888 6,720 10,080 Dir. mat. to 22,388 33,582 24,244 36,366 29,948 44,922 76,580 114,870 purchase Cost per unit 4 7 4 7 4 Total purchase 89,552 235,074 96,976 254,562 119,792 314,454 306,320 804,090 cost Feedback Check My Work See Cornerstone 8.3. 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced 11,200 11,180 14,320 36,700 Direct labor time per unit (hrs.) 1.5 1.5 V 1.5 1.5 Total hours needed 16,800 16,770 21,480 55,050 Wages per hour 20 20 20 20 Total direct labor cost 336,000 335,400 429,600 1,101,000 5. Overhead budget. Round your answers to two decimal places, if required. January February March Total Budgeted direct labor hours 16,800 16,770 21,480 55,050 Variable overhead 3.9 3.9 3.9 3.9 rate Budgeted var. overhead 65,520 65,403 83,772 214,695 Budgeted fixed overhead 161,900 161,900 161,900 485,700 Total overhead 227,420 227,303 245,672 700,395 cost Feedback Check My Work See Cornerstone 8.5. 6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales 10,000 10,500 13,900 34,400 Variable selling & administrative expense per 6.6 6.6 6.6 6.6 unit non 6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales 10,000 10,500 13,900 34,400 Variable selling & administrative expense per 6.6 6.6 6.6 6.6 unit Total variable expense 66,000 69,300 91,740 227,040 Fixed selling & administrative expense: Salaries 88,500 88,500 88,500 265,500 Depreciation 25,000 25,000 25,000 75,000 Other 137,000 137,000 137,000 411,000 Total fixed expenses 250,500 250,500 $ 250,500 751,500 Total selling & administrative expenses 316,500 319,800 342,240 978,540 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 X Total unit cost Number of units 3,200 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 3,784,000 Less: Cost of goods sold Gross margin Less: Selling and administrative expense 978,540 Income before income taxes Feedback Check My Work See Cornerstone 8.10. 10. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "0". January February March Beginning balance 0 x Total $ Cash receipts II $ Total cash available Disbursements: III III Purchases $ DL payroll Overhead 10. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "0". January February March Total Beginning balance ox $ $ $ Cash receipts $ # Total cash available Disbursements: Purchases A DL payroll Overhead Marketing & admin III IIIII III Land Total disbursements Ending balance Financing: Borrowed/repaid MI III Interest paid Ending cash balance $ A