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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

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 13,000
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 month's 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 month's production needs. This is exactly the amount of material on hand on January 1.

  1. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.
  2. 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
  1. 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
  1. The unit selling price of the wiring harness assembly is $110.
  2. In February, the company plans to purchase land for future expansion. The land costs $68,000.
  3. 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:

Question Content Area

1. Sales budget

January February March Total
Units
Unit selling price
Sales

Question Content Area

2. Production budget

January February March Total
Unit sales
Desired ending inventory
Total needed
Less: Beginning inventory
Units produced

Question Content Area

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

Question Content Area

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

Question Content Area

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

Question Content Area

6. Selling and administrative expense budget. Round your answers to the nearest cent, if required.

January February March Total
Planned sales fill in the blank c98e6d070f9007a_1 fill in the blank c98e6d070f9007a_2 fill in the blank c98e6d070f9007a_3 fill in the blank c98e6d070f9007a_4
Variable selling & administrative expense per unit $fill in the blank c98e6d070f9007a_5 $fill in the blank c98e6d070f9007a_6 $fill in the blank c98e6d070f9007a_7 $fill in the blank c98e6d070f9007a_8
Total variable expense $fill in the blank c98e6d070f9007a_9 $fill in the blank c98e6d070f9007a_10 $fill in the blank c98e6d070f9007a_11 $fill in the blank c98e6d070f9007a_12
Fixed selling & administrative expense:
Salaries
Depreciation
Other
Total fixed expenses
Total selling & administrative expenses

Question Content Area

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

Question Content Area

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

Question Content Area

9. Budgeted income statement (ignore income taxes)

Sales
Less: Cost of goods sold
Gross margin
Less: Selling and administrative expense
Income before income taxes

Question Content Area

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
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

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