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:

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	12,500	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	$ 88,500
   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 $62,900. 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:

Sales budget

	January	February	March	Total
Units	fill in the blank 0d2571051fa3046_1	fill in the blank 0d2571051fa3046_2	fill in the blank 0d2571051fa3046_3	fill in the blank 0d2571051fa3046_4
Unit selling price	$fill in the blank 0d2571051fa3046_5	$fill in the blank 0d2571051fa3046_6	$fill in the blank 0d2571051fa3046_7	$fill in the blank 0d2571051fa3046_8
Sales	$fill in the blank 0d2571051fa3046_9	$fill in the blank 0d2571051fa3046_10	$fill in the blank 0d2571051fa3046_11	$fill in the blank 0d2571051fa3046_12

Production budget

	January	February	March	Total
Unit sales	fill in the blank 97de3e02001905f_1	fill in the blank 97de3e02001905f_2	fill in the blank 97de3e02001905f_3	fill in the blank 97de3e02001905f_4
Desired ending inventory	fill in the blank 97de3e02001905f_5	fill in the blank 97de3e02001905f_6	fill in the blank 97de3e02001905f_7	fill in the blank 97de3e02001905f_8
Total needed	fill in the blank 97de3e02001905f_9	fill in the blank 97de3e02001905f_10	fill in the blank 97de3e02001905f_11	fill in the blank 97de3e02001905f_12
Less: Beginning inventory	fill in the blank 97de3e02001905f_13	fill in the blank 97de3e02001905f_14	fill in the blank 97de3e02001905f_15	fill in the blank 97de3e02001905f_16
Units produced	fill in the blank 97de3e02001905f_17	fill in the blank 97de3e02001905f_18	fill in the blank 97de3e02001905f_19	fill in the blank 97de3e02001905f_20

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 b2b1e800b06dfa7_1	fill in the blank b2b1e800b06dfa7_2	fill in the blank b2b1e800b06dfa7_3	fill in the blank b2b1e800b06dfa7_4	fill in the blank b2b1e800b06dfa7_5	fill in the blank b2b1e800b06dfa7_6	fill in the blank b2b1e800b06dfa7_7	fill in the blank b2b1e800b06dfa7_8
Dir. mat. per unit	fill in the blank b2b1e800b06dfa7_9	fill in the blank b2b1e800b06dfa7_10	fill in the blank b2b1e800b06dfa7_11	fill in the blank b2b1e800b06dfa7_12	fill in the blank b2b1e800b06dfa7_13	fill in the blank b2b1e800b06dfa7_14	fill in the blank b2b1e800b06dfa7_15	fill in the blank b2b1e800b06dfa7_16
Production needs	fill in the blank b2b1e800b06dfa7_17	fill in the blank b2b1e800b06dfa7_18	fill in the blank b2b1e800b06dfa7_19	fill in the blank b2b1e800b06dfa7_20	fill in the blank b2b1e800b06dfa7_21	fill in the blank b2b1e800b06dfa7_22	fill in the blank b2b1e800b06dfa7_23	fill in the blank b2b1e800b06dfa7_24
Desired EI	fill in the blank b2b1e800b06dfa7_25	fill in the blank b2b1e800b06dfa7_26	fill in the blank b2b1e800b06dfa7_27	fill in the blank b2b1e800b06dfa7_28	fill in the blank b2b1e800b06dfa7_29	fill in the blank b2b1e800b06dfa7_30	fill in the blank b2b1e800b06dfa7_31	fill in the blank b2b1e800b06dfa7_32
Total needed	fill in the blank b2b1e800b06dfa7_33	fill in the blank b2b1e800b06dfa7_34	fill in the blank b2b1e800b06dfa7_35	fill in the blank b2b1e800b06dfa7_36	fill in the blank b2b1e800b06dfa7_37	fill in the blank b2b1e800b06dfa7_38	fill in the blank b2b1e800b06dfa7_39	fill in the blank b2b1e800b06dfa7_40
Less: BI	fill in the blank b2b1e800b06dfa7_41	fill in the blank b2b1e800b06dfa7_42	fill in the blank b2b1e800b06dfa7_43	fill in the blank b2b1e800b06dfa7_44	fill in the blank b2b1e800b06dfa7_45	fill in the blank b2b1e800b06dfa7_46	fill in the blank b2b1e800b06dfa7_47	fill in the blank b2b1e800b06dfa7_48
Dir. mat. to purchase	fill in the blank b2b1e800b06dfa7_49	fill in the blank b2b1e800b06dfa7_50	fill in the blank b2b1e800b06dfa7_51	fill in the blank b2b1e800b06dfa7_52	fill in the blank b2b1e800b06dfa7_53	fill in the blank b2b1e800b06dfa7_54	fill in the blank b2b1e800b06dfa7_55	fill in the blank b2b1e800b06dfa7_56
Cost per unit	$fill in the blank b2b1e800b06dfa7_57	$fill in the blank b2b1e800b06dfa7_58	$fill in the blank b2b1e800b06dfa7_59	$fill in the blank b2b1e800b06dfa7_60	$fill in the blank b2b1e800b06dfa7_61	$fill in the blank b2b1e800b06dfa7_62	$fill in the blank b2b1e800b06dfa7_63	$fill in the blank b2b1e800b06dfa7_64
Total purchase cost	$fill in the blank b2b1e800b06dfa7_65	$fill in the blank b2b1e800b06dfa7_66	$fill in the blank b2b1e800b06dfa7_67	$fill in the blank b2b1e800b06dfa7_68	$fill in the blank b2b1e800b06dfa7_69	$fill in the blank b2b1e800b06dfa7_70	$fill in the blank b2b1e800b06dfa7_71	$fill in the blank b2b1e800b06dfa7_72

Direct labor budget. Round your answers to two decimal places, if required.

	January	February	March	Total
Units to be produced	fill in the blank c04d6a0a4068045_1	fill in the blank c04d6a0a4068045_2	fill in the blank c04d6a0a4068045_3	fill in the blank c04d6a0a4068045_4
Direct labor time per unit (hrs.)	fill in the blank c04d6a0a4068045_5	fill in the blank c04d6a0a4068045_6	fill in the blank c04d6a0a4068045_7	fill in the blank c04d6a0a4068045_8
Total hours needed	fill in the blank c04d6a0a4068045_9	fill in the blank c04d6a0a4068045_10	fill in the blank c04d6a0a4068045_11	fill in the blank c04d6a0a4068045_12
Wages per hour	$fill in the blank c04d6a0a4068045_13	$fill in the blank c04d6a0a4068045_14	$fill in the blank c04d6a0a4068045_15	$fill in the blank c04d6a0a4068045_16
Total direct labor cost	$fill in the blank c04d6a0a4068045_17	$fill in the blank c04d6a0a4068045_18	$fill in the blank c04d6a0a4068045_19	$fill in the blank c04d6a0a4068045_20