Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 13,800
April 16,000
May 18,500

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

Finished goods inventory on January 1 is 900 units. The desired ending inventory for each month is 20 percent of the next months sales.

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.

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

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

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

The unit selling price of the wiring harness assembly is $110.

In February, the company plans to purchase land for future expansion. The land costs $68,000.

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.image text in transcribed

Required: Prepare a monthly operating budget for the first quarter with the following schedules: 1. Sales budget

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing An International Approach

Authors: Bahram Soltani

1st Edition

9780273657736

More Books

Students also viewed these Accounting questions

Question

What is a statistical control chart, and how is it used?

Answered: 1 week ago