Woodruff 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 for the coming four months follow:

January ....40,000

February .....50,000

March ......60,000

April .....60,000

The following data pertain to production policies and manufacturing specifications followed by Woodruff Manufacturing:

a. Finished goods inventory on January 1 is 32,000 units, each costing $148.71. The desired ending inventory for each month is 80 percent of the next month's sales.

b. The data on materials used are as follows:

Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50 percent of that month's estimated sales. This is exactly the amount of material on hand on January 1.
c. The direct labor used per unit of output is four hours. The average direct labor cost per hour is $9.25.
d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)

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

f. The unit selling price of the subassembly is $180.
g. All sales and purchases are for cash. The cash balance on January 1 equals $400,000. 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 percent per annum. No money is owed at the beginning of January.

Required:
1. Prepare a monthly operating budget for the first quarter with the following schedules.
(Assume that there is no change in work-in-process inventories.)
a. Sales budget
b. Production budget
c. Direct materials purchases budget
d. Direct labor budget
e. Overhead budget
f. Selling and administrative expenses budget
g. Ending finished goods inventory budget
h. Cost of goods sold budget
i. Budgeted income statement
j. Cashbudget

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Direct Material Metal Components Per-Unit Usage 10 lbs. Unit Cost ($) Fixed-Cost Component ( Variable-Cost Component ($) 1.00 0.50 0.40 Supplies Power Maintenance Supervision Depreciation Taxes Other 30,000 16,000 200,000 12,000 80,000 1.50 Fixed Costs s (S) Variable Costs ($) Salaries Commissions Depreciation 50,000 40,000 20,000 2.00 Shipping 1.00 0.60 Other