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Budgeting Test - Version 2 Ally Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is ufacturing Direct Labor Budget (Sch sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming five For the Quarter Ended March 31 months follow: January 42,000 Units to be produced (Sch. 2) January February March Total February Much 52,000 DLH per unit 51.600 59,000 April 60,000 Total hours needed 154,800 62,000 Cost per hour $14.25 The following data pertain to production policies and manufacturing specifications followed by Ally Maunfacturing: Total cost 2,205,900 a. Finished goods inventory on January 1 is 32,000 units, each costing $165.95 The desired ending inventory for each month is 80% of the next month's sales. Ally Manufacturing b. The data on materials used are as follows Overhead Budget (Schedule 5) Direct material DM Unit cost ($) For the Quarter Ended March 31 Metal Per-unit Usage Total Components Budgeted direct labor hours January February March Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% Variable overhead rate 154.800 Budgeted variable overhead 371.520 $2.40 $2.40 the prior year. of the next month's production needs. This is exactly the amount of material on hand on December 31 of Budgeted fixed overhead Total overhead 338,000 709.520 C. The direct labor used per unit of output is per hour is 14.25 $ hours. The average direct labor cost Ally Manufacturing Selling and Administrative Expenses Budget (Schedule 6) labor hours.) . Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct For the Quarter Ended March 31 Fixed-Cost Variable-Cost Planned sales in units (Sched. 1) January February March Total Component ($) Component ($) 42,000 Supplies 1.00 Var. selling & admin. exp. per unit $3.60 Power 0.50 variable expense 151,200 Maintenance 30,000 0.40 ed selling & admin. expenses: Supervision 16,00 Salaries 50,000 40,000 Depreciation 200,000 Depreciation Other 20,000 Taxes 12,000 Other Total fixed expenses 80,000 338,000 0.50 Total selling & admin. expenses Total 2.40 g and administrative expenses are also estimated using a flexible budgeting formula (Note: Activity is measured in units sold.) Ally Manufacturing Ending Finished Goods Inventory Budget (Schedule 7) Fixed Cost ($) Variable Cost ($) For March 31 Salaries 50,00 Commissions 2.00 Unit cost computation: Direct materials: Depreciation 40,000 Units or Hours Shipping 1.00 Components $8 . 00 Other 20,000 0.60 Total 110,000 Direct labor Overhead $14.25 f. The unit selling price of the subassembly is $205.00 Vanable Fixed $2.40 $2.0000 g. All sales and purchases are for cash. The cash balance on January 1 equals $400,000 The firm requires a minimum ending balance of 50,000 $. If the firm develops a cash shortage by Units in finished goods inventory the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the Finished goods inventory end of month, as is the interest due (cash borrowed at the end of the month is repaid at end of the following month). The interest rate is 12% per annum. No money is own at the beginning of January Ally Manufacturing Cost of Goods Sold Budget (Schedule 8) For the Quarter Ended March 31 Required: Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that irect materials (Sched. 3): there is no change in work-in-process inventories.) Metal Cost Components $8.00 Units 1.690.000 a. Sales budget f. Selling and administrative expenses budge $5.00 992,400 b. Production budget g. Ending finished goods inventory budget Direct labor (Schedule 4) c. Direct materials purchases budget d. Direct labor budget h. Cost of goods sold budget Overhead (Schedule 5) . Budgeted income statemen Budgeted manuf. costs e. Overhead budget j. Cash budget Beginning finished goods $165.95 Goods available for sale 32,000 Student ID: Less: Ending finished goods (Schedule 7) Name: Budgeted cost of goods sold Ally Manufacturing Sales Budget (Schedule 1) Ally Manufacturing For the Quarter Ended March 31 Budgeted Income Statement (Schedule 9) For the Quarter Ended March 31 Sales (Schedule 1) 42,000 February March Total Units January Less: Cost of goods sold (Schedule 8) x Selling price $205 Gross margin Sales $ 8,610,000 ss: Selling and admin. expenses (Sched. 6) Income before taxes Ally Manufacturing Ally Manufacturing Cash Budget (Schedule 10) Production Budget (Schedule 2) For the Quarter Ended March 31 For the Quarter Ended March 31 January February March Total Sales (Schedule 1) January February March Total Beginning balance Cash receipts 400.000 8.610,000 Desired ending inventory 48,000 Cash available $ 9.010,000 Total needs Less disbursements: 32,000 Purchases (Sch. 3) Less: Beginning inventory Direct labor (Sch. 4) $ 5,952,000 Units produced Overhead (Sch. 5) 2,205.900 509.520 Selling and admin. (Sch. 6) 221,200 Total disbursements $ 8.888,620 Tentative ending balance 121.380 Borrowed/(repaid) Interest paid Ally Manufacturing Ending balance $ 121.380 Direct Materials Purchases Budget (Schedule 3) For the Quarter Ended March 31 January February Total Metal Comp. March Metal Comp. Metal Comp. Metal Comp. Units to be produced (Sch. 2) 51,600 48,000 x Direct materials per unit 10 Production needs 516,00 288,000 Desired ending inventory 288,000 172,800 308,000 184,800 Total needs 804,000 460,800 Less: Beginning inve 144,000 Direct materials to be 58,000 purchased 546,000 316,800 x Cost per unit $8 $5 Total cost 4,368,000 $1.584.000