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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:

  1. Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each month is 80% of the next month's sales.
  2. The data on materials used are as follows:
    Direct Material Per-Unit Usage DM Unit Cost ($)
    Metal 10 lbs. 8
    Components 6 5
    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.
  3. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25.
  4. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.)
    Fixed-Cost  
    Component ($)    		 Variable-Cost
    Component ($)
    Supplies — 1.00
    Power — 0.50
    Maintenance 30,000 0.40
    Supervision 16,000 —
    Depreciation 200,000 —
    Taxes 12,000 —
    Other 80,000 0.50
  5. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.)
    Fixed   
    Costs ($)    		 Variable
    Costs ($)
    Salaries 50,000 —
    Commissions — 2.00
    Depreciation 40,000 —
    Shipping — 1.00
    Other 20,000 0.60
  6. The unit selling price of the subassembly is $205.
  7. 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.

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 $fill in the blank 322f46f2dfde015_1 $fill in the blank 322f46f2dfde015_2 $fill in the blank 322f46f2dfde015_3 $fill in the blank 322f46f2dfde015_4
Cash receipts fill in the blank 322f46f2dfde015_5 fill in the blank 322f46f2dfde015_6 fill in the blank 322f46f2dfde015_7 fill in the blank 322f46f2dfde015_8
Cash available $fill in the blank 322f46f2dfde015_9 $fill in the blank 322f46f2dfde015_10 $fill in the blank 322f46f2dfde015_11 $fill in the blank 322f46f2dfde015_12
Less Disbursements:
Purchases $fill in the blank 322f46f2dfde015_13 $fill in the blank 322f46f2dfde015_14 $fill in the blank 322f46f2dfde015_15 $fill in the blank 322f46f2dfde015_16
Direct labor fill in the blank 322f46f2dfde015_17 fill in the blank 322f46f2dfde015_18 fill in the blank 322f46f2dfde015_19 fill in the blank 322f46f2dfde015_20
Overhead fill in the blank 322f46f2dfde015_21 fill in the blank 322f46f2dfde015_22 fill in the blank 322f46f2dfde015_23 fill in the blank 322f46f2dfde015_24
Selling & admin. fill in the blank 322f46f2dfde015_25 fill in the blank 322f46f2dfde015_26 fill in the blank 322f46f2dfde015_27 fill in the blank 322f46f2dfde015_28
Total $fill in the blank 322f46f2dfde015_29 $fill in the blank 322f46f2dfde015_30 $fill in the blank 322f46f2dfde015_31 $fill in the blank 322f46f2dfde015_32
Tentative ending balance $fill in the blank 322f46f2dfde015_33 $fill in the blank 322f46f2dfde015_34 $fill in the blank 322f46f2dfde015_35 $fill in the blank 322f46f2dfde015_36
Borrowed/repaid fill in the blank 322f46f2dfde015_37 fill in the blank 322f46f2dfde015_38 fill in the blank 322f46f2dfde015_39 fill in the blank 322f46f2dfde015_40
Interest paid fill in the blank 322f46f2dfde015_41 fill in the blank 322f46f2dfde015_42
Ending balance $fill in the blank 322f46f2dfde015_43 $fill in the blank 322f46f2dfde015_44 $fill in the blank 322f46f2dfde015_45 $fill in the blank 322f46f2dfde015_46

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Allison Manufacturing
Budgeted Sales Revenue January February March Total Note
Monthly Sales Budget         40,000.00           50,000.00           60,000.00         150,000.00 A
Sell price per unit               205.00                 205.00                 205.00 B
Budgeted Sales Revenue 8,200,000.00 10,250,000.00 12,300,000.00 30,750,000.00 C=A*B
Production budget January February March Total April May Note
Monthly Sales Budget         40,000.00            50,000.00            60,000.00         150,000.00                60,000.00      62,000.00 See A
Add: Closing         40,000.00            48,000.00            48,000.00           48,000.00                49,600.00 D= 80% of A of next month.
Less: Opening         32,000.00            40,000.00            48,000.00           32,000.00                48,000.00 E= 80% of A of same month.
Production budget         48,000.00           58,000.00           60,000.00         166,000.00                61,600.00 F
Material Purchases budget- Metal January February March Total April Note
Production budget         48,000.00            58,000.00            60,000.00         166,000.00                61,600.00 See F
Material required per unit                 10.00                   10.00                   10.00                        10.00 G
Material required for production       480,000.00         580,000.00         600,000.00      1,660,000.00             616,000.00 H=F*G
Add: Closing       290,000.00         300,000.00         308,000.00         308,000.00 I= 50% of F of next month.
Less: Opening       240,000.00         290,000.00         300,000.00         240,000.00 J= 50% of F of same month.
Material Purchases budget (Pounds)       530,000.00         590,000.00         608,000.00      1,728,000.00 K
Cost per pound                   8.00                      8.00                      8.00 L
Material cost- Metal 4,240,000.00      4,720,000.00      4,864,000.00 13,824,000.00 M=K*L
Material Purchases budget- Components January February March Total April
Production budget         48,000.00            58,000.00            60,000.00         166,000.00                61,600.00 See F
Material required per unit                   6.00                      6.00                      6.00                          6.00 N
Material required for production       288,000.00         348,000.00         360,000.00         996,000.00             369,600.00 O=F*N
Add: Closing       174,000.00         180,000.00         184,800.00         184,800.00 P= 50% of O of next month.
Less: Opening       144,000.00         174,000.00         180,000.00         144,000.00 Q= 50% of O of same month.
Material Purchases budget (Units)       318,000.00         354,000.00         364,800.00      1,036,800.00 R
Cost per unit                   5.00                      5.00                      5.00 S
Material cost- Components 1,590,000.00      1,770,000.00      1,824,000.00      5,184,000.00 T=R*S
Total Material cost 5,830,000.00      6,490,000.00      6,688,000.00 19,008,000.00 U=M+T
Direct labor budget January February March Total Note
Production budget         48,000.00            58,000.00            60,000.00         166,000.00 See F
ekkarill92 answered 1 year ago
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