Kindly Answer this Case study mentioned below. make tables for every answers and explain it with the valid formula how its done.

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\mathrm{.}06.$ The desired

ending inventory for each month is $80\%$ of the next month$$s sales.

$$ The data on materials used are as follows:

Direct Material Per$-$Unit Usage DM Unit Cost

Metal $10$ lbs$.$ $$8$

Components $65$

$$ 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.

$$ The direct labour used per unit of output is $3$ hours. The average direct labour cost per

hour is $$14\mathrm{.}25.$

$$ Overhead each month is estimated using a flexible budget formula. $($Note: Activity is

measured in direct labour hours.$)$

Fixed Component Variable Component

Supplies $-$ $$1\mathrm{.}00$

Power $-0\mathrm{.}50$

Maintenance $$30,0000\mathrm{.}40$

Supervision $16,000-$

Depreciation $200,000-$

Taxes $12,000-$

Other $80,0000\mathrm{.}50$

$($Continue on next page$)$

ACC$6902$ Assessment $2$ T$12024$ Page $6$ of $6$

$$ Monthly selling and administrative expenses are also estimated using a flexible budgeting

formula. $($Note: Activity is measured in units sold.$)$

Fixed

Component

Variable

Component

Salaries $$50,000-$

Commissions $-$ $$2\mathrm{.}00$

Depreciation $40,000-$

Shipping $-1\mathrm{.}00$

Other $20,0000\mathrm{.}60$

$$ The unit selling price of the subassembly is $$205.$

$$ All sales and purchases are for cash. The cash balance on January $1$ equals $$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 following month, as is the interest due. The

interest rate is $12\%$ per annum. No money is owed at the beginning of January.

Required:

a$)$ Explain how budgets are used in planning and control and how both small and large

organisations can benefit from budgeting.

b$)$ 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$)$

i$.$ Sales budget

ii$.$ Production budget

iii. Direct materials purchases budget

iv$.$ Direct labour budget

v$.$ Overhead budget

vi$.$ Selling and administrative expenses budget

vii. Ending finished goods inventory budget