In: Accounting
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:
Direct Material | Per-Unit Usage | DM Unit Cost ($) | |
Metal | 10 lbs. | 8 | |
Components | 6 | 5 |
Fixed-Cost Component ($) |
Variable-Cost Component ($) |
||
Supplies | — | 1.00 | |
Power | — | 0.50 | |
Maintenance | 30,000 | 0.40 | |
Supervision | 16,000 | — | |
Depreciation | 200,000 | — | |
Taxes | 12,000 | — | |
Other | 80,000 | 0.50 |
Fixed Costs ($) |
Variable Costs ($) |
||
Salaries | 50,000 | — | |
Commissions | — | 2.00 | |
Depreciation | 40,000 | — | |
Shipping | — | 1.00 | |
Other | 20,000 | 0.60 |
Required:
1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.)
a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing | ||||
Sales Budget | ||||
For the Quarter Ended March 31 | ||||
January | February | March | Total | |
Units | ||||
Selling price | $ | $ | $ | $ |
Sales | $ | $ | $ | $ |
Feedback
Correct
b. Schedule 2: Production Budget.
Allison Manufacturing | ||||
Production Budget | ||||
For the Quarter Ended March 31 | ||||
January | February | March | Total | |
Sales | ||||
Desired ending inventory | ||||
Total needs | ||||
Less: Beginning inventory | ||||
Units to be produced |
Feedback
Partially correct
c. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing | ||||||||
Direct Materials Purchases Budget | ||||||||
For the Quarter Ended March 31 | ||||||||
January Metal | January Components | February Metal | February Components | March Metal | March Components | Total Metal | Total Components | |
Units to be produced | ||||||||
Direct materials per unit | ||||||||
Production needs | ||||||||
Desired ending inventory | ||||||||
Total needs | ||||||||
Less: Beginning inventory | ||||||||
Direct materials to be purchased | ||||||||
Cost per unit | $ | $ | $ | $ | $ | $ | $ | $ |
Total cost | $ | $ | $ | $ | $ | $ | $ | $ |
Feedback
Correct
d. Schedule 4: Direct Labor Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing | ||||
Direct Labor Budget | ||||
For the Quarter Ended March 31 | ||||
January | February | March | Total | |
Units to be produced | ||||
Direct labor time per unit (hours) | ||||
Total hours needed | ||||
Cost per hour | $ | $ | $ | $ |
Total cost | $ | $ | $ | $ |
Feedback
Correct
e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing | ||||
Overhead Budget | ||||
For the Quarter Ended March 31 | ||||
January | February | March | Total | |
Budgeted direct labor hours | ||||
Variable overhead rate | $ | $ | $ | $ |
Budgeted variable overhead | $ | $ | $ | $ |
Budgeted fixed overhead | ||||
Total overhead | $ | $ | $ | $ |
Feedback
Correct
f. Schedule 6: Selling and Administrative Expenses Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing | ||||
Selling and Administrative Expenses Budget | ||||
For the Quarter Ended March 31 | ||||
January | February | March | Total | |
Planned sales | ||||
Variable selling and administrative expenses per unit | $ | $ | $ | $ |
Total variable expense | $ | $ | $ | $ |
Fixed selling and administrative expenses: | ||||
Salaries | $ | $ | $ | $ |
Depreciation | ||||
Other | ||||
Total fixed expenses | $ | $ | $ | $ |
Total selling and administrative expenses | $ | $ | $ | $ |
Feedback
Correct
g. Schedule 7: Ending Finished Goods Inventory Budget. If required, round amounts to the nearest cent.
Allison Manufacturing | ||
Ending Finished Goods Inventory Budget | ||
For the Quarter Ended March 31 | ||
Unit cost computation: | ||
Direct materials: | ||
Metal | $ | |
Components | $ | |
Direct labor | ||
Overhead: | ||
Variable | ||
Fixed | ||
Total unit cost | $ | |
Finished goods inventory | $ |
Feedback
Partially correct
h. Schedule 8: Cost of Goods Sold Budget.
Allison Manufacturing | ||
Cost of Goods Sold Budget | ||
For the Quarter Ended March 31 | ||
Direct materials | ||
Metal | $ | |
Components | $ | |
Direct labor used | ||
Overhead | ||
Budgeted manufacturing costs | $ | |
Add: Beginning finished goods | ||
Cost of goods available for sale | $ | |
Less: Ending finished goods | ||
Budgeted cost of goods sold | $ |
Feedback
Partially correct
i. Schedule 9: Budgeted Income Statement. Use a minus sign to indicate a negative amount.
Allison Manufacturing | |
Budgeted Income Statement | |
For the Quarter Ended March 31 | |
Sales | $ |
Less: Cost of goods sold | |
Gross margin | $ |
Less: Selling and administrative expenses | |
Income before taxes | $ |
Feedback
Partially correct
j. Schedule 10: Cash Budget. If an amount is zero, enter "0". Use a minus sign to enter a negative amount.
Allison Manufacturing | ||||
Cash Budget | ||||
For the Quarter Ended March 31 | ||||
January | February | March | Total | |
Beginning balance | $ | $ | $ | $ |
Cash receipts | ||||
Cash available | $ | $ | $ | $ |
Less Disbursements: | ||||
Purchases | $ | $ | $ | $ |
Direct labor | ||||
Overhead | ||||
Selling & admin. | ||||
Total | $ | $ | $ | $ |
Tentative ending balance | $ | $ | $ | $ |
Borrowed/repaid | ||||
Interest paid | ||||
Ending balance | $ | $ | $ | $ |