where did the $290,000 come from ?

8 Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities, Projected sales in units for the coming 5 months follow: January 40,000 February 50,000 March 60,000 April 60,000 May 62,000 The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing $166,06. The desired ending inventory for each month is 80% of the next month's sales. b. The data on materials used are as follows: Direct Material Per-Unit Usage DM Unit Cost (5) Metal 10 lbs. Components 6 Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next month's production needs. This is exactly the amount of material on hand on December 31 of the prior year. c. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25 d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) Fixed-Cost Variable-Cost Component (5) Component (5) Supplies 1.00 Power 0.50 Maintenance 30,000 0.40 Supervision 16,000 Depreciation 200,000 Taxes 12,000 Other 80,000 0.50 c. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Variable Costs (5) Costs (8) Salaries 50,000 Commissions 2.00 Depreciation 40,000 Shipping 1.00 Other 20,000 0.60 1. The unit selling price of the subassembly is $205. & 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 the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 12% per annum. No money is owed at the beginning of January. Direct materials purchase budgets Particulars Units to be produced Per Unit Material needed in production Add Desired Ending inventory of raw Material Total Etimated material Required Less Beginning inventory of raw material Material to be purchased Cost Per Unit Cost of Material to be purchased January Metal 48,000 10 480,000 290,000 770,000 240,000 530,000 8 4,240,000