Operating Budget, Comprehensive Analysis.

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 13,200 April 16,000 May 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: a. 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. b. The data on materials used are as follows: Direct Material Per-Unit Usage Unit Cost Part #K298 2 $4 Part #C30 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. c. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20. d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)Fixed Cost Variable Cost Component 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 e. 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 f. The unit selling price of the wiring harness assembly is $110. g. In February, the company plans to purchase land for future expansion. The land costs $68,000. h. All sales and purchases are for cash. The cash balance on January 1 equals $62,700. 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.1. Sales budget January February March Total Units 10,000 10,500 13,200 33,700 Unit selling 110 110 110 110 price Sales 1,100,000 1,155,000 1,452,000 3,707,0002. Production budget Unit sales 10,000 | Desired ending inventory 2,100 | Total needed 12,100 | Less: Beginning inventory v Units produced 11,200 | 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 11,200 11,200 11,040 11,040 13,760 13,760 Din mat. per unit 2 3 2 3 2 3 Production needs 22,400 33,600 22,080 33,120 27,520 V 41,280 Desired EI 6,624 9,936 8,256 12,384 9,600 X 14,400 X Total needed 29,024 43,536 30,336 45,504 37,120 X 55,680 X Less: BI 6,720 10,080 6,624 9,936 8,256 12,384 Din mat. to purchase 22,304 33,456 23,712 35,568 28,864 X 43,296 X Cost per unit 4 7 Total purchase cost 89,120 X5. Overhead budget. Round your answers to two decimal places, if required. January February March Total Budgeted direct 16,800 16,560 20,640 54,000 labor hours Variable overhead 3.90 3.90 3.90 3.90 Budgeted var. PeayJano Budgeted fixed overhead Total overhead 228,240 X 227,384 X 240,296 X 696,920 X COST6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales 10,000 10,500 13,000 X 33,500 X Variable selling & administrative expense per 6.6 6.6 6.6 6.6 unit Total variable expense 66,000 69,300 85,800 X 221,100 X Fixed selling & administrative expense: Salaries Depreciation Other Total fixed expenses Total selling & administrative expenses7. 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\f9. Budgeted income statement (ignore income taxes) Sales Less: Cost of goods sold Gross margin Less: Selling and administrative expense Income before income taxes10. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "0". 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 21 Direct labor 30 Overhead: Variable 3.9 X Fixed 4.49 X Total unit cost 67.39 X Number of units 7,940 Finished goods 535,076. XB. Cost of goods sold budget Direct materials used Part K298 288,000 Part C30 756,000 1,044,000 Direct labor used 1,080,000 Overhead 696,000 Budgeted manufacturing 2,820,000 Costs Add: Beginning finished goods 3,639,060 X Goods available for sale 6,459,060 Less: Ending finished goods 4,174,811 Budgeted cast of goods 2,284,250 X sold Foodback Chock My Work To prepare the cost of goods sold budget include the cost of direct materials used, direct labor used, and budgeted manufacturing costs. Also include beginning finished goods and ending finished goods inventory.9. Budgeted income statement (ignore income taxes) Sales 3,707,000 Legs: Cost of goods sold 2,284,250 X Gross margin 1, 422,750 X Less: Selling and administrative expense 973,920 Income before income taxes 448,83010. Cash budget Enter a negative balance as a negative amount, and if an amount is zero enter "0". January February March Total Beginning balance 62,700 25,910 X 25,646 X 114,256 Cash receipts 148,830 X 0 X 0 X 148,830 X Total cash 511,530 25,910 X 25,646 X 56,306 available Disbursements: Purchases X X X 0 X DL payroll 16,800 X 16,560 20,640 X 54,000 X Overhead 227,320 X 226,384 X 242,296 X 696,000 X Marketing & 316,500 319,800 X 337,620 X 973,920 admin Land 56,000 68,000 Total disbursements 628,620 X 562,744 X 600,556 X 1,791,920 X Ending balance -117,090 X -536,834 X -574,910 X -1,228,834 Financing: Borrowed/repaid 143,000 X 681,000 1,270,000 X 2,094,000 Interest paid -143,000 681,000 824,000 Ending cash balance 25,910 X 25,646 X 32,926 X 596,012 X Feedback Check My Work To prepare the cash budget begin with the beginning cash balance. Add cash receipts and subtract cash disbursements. Then consider any cash that is borrowed/repaid and any interest paid on cash borrowed