Wittgenstein Pty Ltd produces propellers used in the production of wind-powered electricity generating equipment. The propellers are sold to various engineering companies that produce wind generators in Australia and Europe.

Projected sales in units for the coming four months are provided in the assignment data sheet.

Notes:

The stipulated amount of materials to be on hand at the beginning of the month is exactly the amount of material on hand on January 1. (Assume that the material costs are the same as current quarter's production.)

The overheads are estimated using a flexible budget formula (Activity is measured in direct labour hours.). You will have to determine the Maintenance cost using the relevant statistical data provided in the data list.

Monthly selling and administrative overhead expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.) Finance charges and bad debts are included in the figures provided and do not need to be identified separately in the selling and administrative overhead expenses.

If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage (including any interest payments due). Any cash borrowed is repaid one month later, as is the interest due.

Required:

Prepare an operating budget for the first quarter (showing each month and totals for the quarter) with the following schedules:

Sales budget

Production budget

Direct materials purchases budget

Direct labour budget

Manufacturing overhead budget

Ending finished goods inventory budget

Cost of goods sold budget

Budgeted income statement (ignore income taxes and GST)

Cash budget