January 40,000 February 50,000 March 60,000 April 60,000 May 62,000 The following data pertain to production policies
January 40,000 February 50,000 March 60,000 April 60,000 May 62,000 The following data pertain to production policies
Chapter7: Budgeting
Section: Chapter Questions
Problem 14PA: Total Pops data show the following information: New machinery will be added in April. This machine...
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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 $166.06. The desired ending inventory for each month is 80% of the next month's sales.
- The data on materials used are as follows:
Direct Material Per-Unit Usage DM Unit Cost ($) Metal 10 lbs. 8 Components 6 5 - The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25.
- Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.)
Fixed-Cost
Component ($)Variable-Cost
Component ($)Supplies — 1.00 Power — 0.50 Maintenance 30,000 0.40 Supervision 16,000 — Depreciation 200,000 — Taxes 12,000 — Other 80,000 0.50 - Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.)
Fixed
Costs ($)Variable
Costs ($)Salaries 50,000 — Commissions — 2.00 Depreciation 40,000 — Shipping — 1.00 Other 20,000 0.60 - 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 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.
Required:
1. 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.)
Question Content Area
a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer.
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