Question

In: Accounting

Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces wiring harness assemblies used in the production of semi-trailer...

Operating Budget, Comprehensive Analysis

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:

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.

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.

The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.

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

Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)

Fixed Costs Variable Costs
Salaries $ 88,500 —     
Commissions —    $1.40   
Depreciation 25,000 —   
Shipping 3.60   
Other 137,000 1.60   

The unit selling price of the wiring harness assembly is $110.

In February, the company plans to purchase land for future expansion. The land costs $68,000.

All sales and purchases are for cash. The cash balance on January 1 equals $62,900. 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:

1. Sales budget

January February March Total
Units            
Unit selling price $ $ $ $
Sales $ $ $ $

Feedback

See Cornerstone 8.1.

2. Production budget

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

Feedback

See Cornerstone 8.2.

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 $ $ $ $ $ $ $ $

Feedback

See Cornerstone 8.3.

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 $ $ $ $

Feedback

See Cornerstone 8.4.

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 $ $ $ $

Feedback

See Cornerstone 8.5.

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

January February March Total
Planned sales            
Variable selling & administrative expense per unit $ $ $ $
Total variable expense $ $ $ $
Fixed selling & administrative expense:
Salaries $ $ $ $
Depreciation            
Other            
Total fixed expenses $ $ $ $
Total selling & administrative expenses $ $ $ $

Feedback

See Cornerstone 8.9.

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 $

Feedback

See Cornerstone 8.6.

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 $

Feedback

See Cornerstone 8.7.

9. Budgeted income statement (ignore income taxes)

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

Feedback

See Cornerstone 8.10.

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 $ $ $ $

Feedback

See Cornerstone 8.12.

Feedback

Partially correct

Solutions

Expert Solution

Solution:

1)

Sales Budget

January

February

March

Total

Units

10000

10500

13000

33500

Unit selling price

$110

$110

$110

$110

Sales

$1,100,000

$1,155,000

$1,430,000

$3,685,000

2)

Production Budget

January

February

March

Total

Unit sales

10000

10500

13000

Desired ending inventory

2100

2600

3200

Total needed

12100

13100

16200

Less: Beginning inventory

900

2100

2600

Units produced

11200

11000

13600

35800

March Ending Inventory = April Sales Unit 16,000*20% = 3,200 Units

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

11200

11000

11000

11000

13600

13600

  

  

Dir. mat. per unit

2

3

2

3

2

3

  

  

Production needs

22400

33000

22000

33000

27200

40800

  

  

Desired Ending inventory

(30% of next months production need)

6600

9900

8160

12240

9900

(April Production Units 16500*2*20%)

14850

(April Production Units 16500*3*20%)

  

  

Total needed

29000

42900

30160

45240

37100

55650

  

  

Less: BI

6720

9900

6600

9900

8160

12240

  

  

Dir. mat. to purchase

22280

33000

23560

35340

28940

43410

74780

111750

Cost per unit

$4

$7

$4

$7

$4

$7

$4

$7

Total purchase cost

$89,120

$231,000

$94,240

$247,380

$115,760

$303,870

$299,120

$782,250

4)

Direct labor budget

January

February

March

Total

Units to be produced

11200

11000

13600

  

Direct labor time per unit (hrs.)

1.5

1.5

1.5

  

Total hours needed

16800

16500

20400

53700

Wages per hour

$20

$20

$20

$20

Total direct labor cost

$336,000

$330,000

$408,000

$1,074,000

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts


Related Solutions

Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces wiring harness assemblies used in the production of semi-trailer...
Operating Budget, Comprehensive Analysis 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 13,100 April 16,000 May 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: Finished goods inventory on January 1 is 900 units. The desired ending inventory for each...
Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces wiring harness assemblies used in the production of semi-trailer...
Operating Budget, Comprehensive Analysis 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 13,700 April 16,000 May 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: Finished goods inventory on January 1 is 900 units. The desired ending inventory for each...
Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft...
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: Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each...
Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft...
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: Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each...
Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft...
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: Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each...
Comprehensive variance analysis review. Ellis Animal Health, Inc., produces a generic medication used to treat cats...
Comprehensive variance analysis review. Ellis Animal Health, Inc., produces a generic medication used to treat cats with feline diabetes. The liquid medication is sold in 100 ml vials. Ellis employs a team of sales representatives who are paid varying amounts of commission. Given the narrow margins in the generic veterinary drugs industry, Ellis relies on tight standards and cost controls to manage its operations. Ellis has the following budgeted standards for the month of April 2017: Average selling price per...
Variable Production Cost Variance Analysis Iron Products Inc. produces prefabricated iron fencing used in commercial construction....
Variable Production Cost Variance Analysis Iron Products Inc. produces prefabricated iron fencing used in commercial construction. Variable overhead is applied to products based on direct labor hours. The company uses a just-in-time production system and thus has insignificant inventory levels at the end of each month. The company's income statement for the month of November comparing actual results with the flexible budget based on actual sales of 2,000 units is shown below. Actual Budget Variance Sales $1,805,000 $1, 800 ,000...
Comprehensive Case Ethics: Manipulating Data to Establish a Budget (Appendix). Healthy Bar, Inc., produces energy bars...
Comprehensive Case Ethics: Manipulating Data to Establish a Budget (Appendix). Healthy Bar, Inc., produces energy bars for sports enthusiasts. The company’s fiscal year ends on December 31. The production manager, Jim Wallace, is establishing a cost budget for the production department for each month of this coming quarter (January through March). At the end of March, Jim will be evaluated based on his ability to meet the budget for the three months ending March 31. In fact, Jim will receive...
6-42 Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manu-factures a single model, the...
6-42 Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manu-factures a single model, the Pipex. In late 2017, Skulas’s management accountant gathered the following data to prepare budgets for January 2018: Materials and Labor Requirements Direct materials Wood Fiberglass Direct manufacturing labor 9 board feet (b.f.) per snowboard 10 yards per snowboard 5 hours per snowboard Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO...
Production Budget Weightless Inc. produces a Bath and Gym version of its popular electronic scale. The...
Production Budget Weightless Inc. produces a Bath and Gym version of its popular electronic scale. The anticipated unit sales for the scales by sales region are as follows: Bath Scale Gym Scale East Region unit sales 18,400 34,700 West Region unit sales 19,900 20,900 Total 38,300 55,600 The finished goods inventory estimated for October 1, for the Bath and Gym scale models is 1,500 and 2,600 units, respectively. The desired finished goods inventory for October 31 for the Bath and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT