Question

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 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 $62,800. 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.

I just need the last budget, cash budget (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	$	$	$	$

Answer 1

10. Cash budget

	January	February	March	Total
Beginning balance	$62,800	$25,102	$25,749	113,651
Cash receipts	10,000*$110=$1,100,000	10,500*$110=$1,155,000	13,700*$110=1,507,000	3,762,000
Total cash available	$1,162,800	$1,180,102	1,532,749	3,875,651
Dibursements:
Purchases	22,264*4+33,546*7=323,878	24,192*4+36,138*7=349,734	29,724*4+44,586*7=430,998	1,104,610
DL payroll	11,200*1.5*20=336,000	11,140*1.5*20=334,200	14,160*1.5*20=424,800	1,095,000
Overhead
Supplies	1*11,200*1.5=16,800	1*11,140*1.5=16,710	1*14,160*1.5=21,240	54,750
Power	0.2*11,200*1.5=3,360	0.2*11,140*1.5=3,342	0.2*14,160*1.5=4,248	10.950
Maintenance	12,500+1.1*11,200*1.5=30,980	12,500+1.1*11,140*1.5=30,881	12,500+1.1*14,160*1.5=35,864	97,725
Supervision	14,000	14,000	14,000	42,000
Depreciation	44,000	44,000	44,000	132,000
Taxes	4.300	4,300	4,300	12,900
Others	86,000+1.6*11,200*1.5=112,880	86,000+1.6*11,140*1.5=112,736	86,000+1.6*14,160*1.5=119,984	345,600
Marketing & admin
Salaries	88,500	88,500	88,500	265,500
Commissionn	1.40*10,000=14,000	1.40*10,500=14,700	1.40*13,700=19,180	47,880
Depreciation	25,000	25,000	25,000	75,000
Shipping	3.6*10,000=36,000	3.6*10,500=37,800	3.6*13,700=49,320	123,120
Others	137,000+1.6*10,000=153,000	137,000+1.6*10,500=153,800	137,000+1.6*13,700=158,920	465,720
Land		68,000		68,000
Total disburements	1,202,698	1,297,703	1,440,354	3,940,755
Ending balance	-39.898	-117,601	92,395	-65,104
Financing:
Borrowed/repaid	65,000 (64,898 rounded off to 1000)	209,000 (Borrowed rounded off to 1,000) -65.000 (Repaid)	144,000 (Borrowed rounded off to 1,000) -209,000 (Repaid)	418,000 (Borrowed rounded off to 1,000) -274,000 (Repaid)
Interest paid		-650	-2090	-2740
Ending Cash balance	25,102	$25,749	$25,305	76,156

Note 1: Units to be produce

	January	February	March	April
Opening inventory(a)	900	2,100	2,740	3,200
Sale (b)	10,000	10,500	13,700	16,000
Closing inventory (c)	20%*10,500=2,100	20%*13,700=2,740	20%*16,000=3,200	20%*18500=3,700
Prouction (b+c-a)	11,200	11,140	14,160	16,500

Note 2: Raw material (Part#K298) to be purchase

	January	February	March
Opening inventory(a)	11,200 units *2 *30%=6,720	11,140 units *2 *30%=6,584	14,160 units *2*30%=8,496
Consumed	11,200*2=22,400	11,140*2=22,280	14,160*2=28,320
Closing inventory (c)	11,140 units *2 *30%=6,584	14,160 units *2*30%=8,496	16,500 units *2*30%=9,900
Purchases (b+c-a)	22,264	24,192	29,724

Note 3: Raw material (Par#C30) to be purchase

	January	February	March
Opening inventory(a)	11,200 units *3 *30%=10,080	11,140 units *3 *30%=10,026	14,160 units *3*30%=12,744
Consumed	11,200*3=33,600	11,140*3=33,420	14,160*3=42,480
Closing inventory (c)	11,140 units *3 *30%=10,026	14,160 units *3*30%=12,744	16,500 units *3*30%=14,850
Purchases (b+c-a)	33,546	36,138	44,586