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 10,600 March 13,500 April 16,000 May 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: 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. The data on materials used are as follows: Direct Material Per-Unit Usage Unit Cost Part #K298 2 $4 Part #C30 3 7 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. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Fixed Cost Component Variable Cost 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 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 The unit selling price of the wiring harness assembly is $110. In February, the company plans to purchase land for future expansion. The land costs $68,000. 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. Required: Prepare a monthly operating budget for the first quarter with the following schedules: 6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales fill in the blank e495d5fc3ff9fd6_1 fill in the blank e495d5fc3ff9fd6_2 fill in the blank e495d5fc3ff9fd6_3 fill in the blank e495d5fc3ff9fd6_4 Variable selling & administrative expense per unit $fill in the blank e495d5fc3ff9fd6_5 $fill in the blank e495d5fc3ff9fd6_6 $fill in the blank e495d5fc3ff9fd6_7 $fill in the blank e495d5fc3ff9fd6_8 Total variable expense $fill in the blank e495d5fc3ff9fd6_9 $fill in the blank e495d5fc3ff9fd6_10 $fill in the blank e495d5fc3ff9fd6_11 $fill in the blank e495d5fc3ff9fd6_12 Fixed selling & administrative expense: Salaries $fill in the blank e495d5fc3ff9fd6_13 $fill in the blank e495d5fc3ff9fd6_14 $fill in the blank e495d5fc3ff9fd6_15 $fill in the blank e495d5fc3ff9fd6_16 Depreciation fill in the blank e495d5fc3ff9fd6_17 fill in the blank e495d5fc3ff9fd6_18 fill in the blank e495d5fc3ff9fd6_19 fill in the blank e495d5fc3ff9fd6_20 Other fill in the blank e495d5fc3ff9fd6_21 fill in the blank e495d5fc3ff9fd6_22 fill in the blank e495d5fc3ff9fd6_23 fill in the blank e495d5fc3ff9fd6_24 Total fixed expenses $fill in the blank e495d5fc3ff9fd6_25 $fill in the blank e495d5fc3ff9fd6_26 $fill in the blank e495d5fc3ff9fd6_27 $fill in the blank e495d5fc3ff9fd6_28 Total selling & administrative expenses $fill in the blank e495d5fc3ff9fd6_29 $fill in the blank e495d5fc3ff9fd6_30 $fill in the blank e495d5fc3ff9fd6_31 $fill in the blank e495d5fc3ff9fd6_32

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 10,600 March 13,500 April 16,000 May 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: 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. The data on materials used are as follows: Direct Material Per-Unit Usage Unit Cost Part #K298 2 $4 Part #C30 3 7 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. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Fixed Cost Component Variable Cost 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 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 The unit selling price of the wiring harness assembly is $110. In February, the company plans to purchase land for future expansion. The land costs $68,000. 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. Required: Prepare a monthly operating budget for the first quarter with the following schedules: 6. Selling and administrative expense budget. Round your answers to the nearest cent, if required. January February March Total Planned sales fill in the blank e495d5fc3ff9fd6_1 fill in the blank e495d5fc3ff9fd6_2 fill in the blank e495d5fc3ff9fd6_3 fill in the blank e495d5fc3ff9fd6_4 Variable selling & administrative expense per unit $fill in the blank e495d5fc3ff9fd6_5 $fill in the blank e495d5fc3ff9fd6_6 $fill in the blank e495d5fc3ff9fd6_7 $fill in the blank e495d5fc3ff9fd6_8 Total variable expense $fill in the blank e495d5fc3ff9fd6_9 $fill in the blank e495d5fc3ff9fd6_10 $fill in the blank e495d5fc3ff9fd6_11 $fill in the blank e495d5fc3ff9fd6_12 Fixed selling & administrative expense: Salaries $fill in the blank e495d5fc3ff9fd6_13 $fill in the blank e495d5fc3ff9fd6_14 $fill in the blank e495d5fc3ff9fd6_15 $fill in the blank e495d5fc3ff9fd6_16 Depreciation fill in the blank e495d5fc3ff9fd6_17 fill in the blank e495d5fc3ff9fd6_18 fill in the blank e495d5fc3ff9fd6_19 fill in the blank e495d5fc3ff9fd6_20 Other fill in the blank e495d5fc3ff9fd6_21 fill in the blank e495d5fc3ff9fd6_22 fill in the blank e495d5fc3ff9fd6_23 fill in the blank e495d5fc3ff9fd6_24 Total fixed expenses $fill in the blank e495d5fc3ff9fd6_25 $fill in the blank e495d5fc3ff9fd6_26 $fill in the blank e495d5fc3ff9fd6_27 $fill in the blank e495d5fc3ff9fd6_28 Total selling & administrative expenses $fill in the blank e495d5fc3ff9fd6_29 $fill in the blank e495d5fc3ff9fd6_30 $fill in the blank e495d5fc3ff9fd6_31 $fill in the blank e495d5fc3ff9fd6_32

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

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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	10,600
March	13,500
April	16,000
May	18,500

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

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.
The data on materials used are as follows:

Direct Material Per-Unit Usage Unit Cost

Part #K298 2 $4

Part #C30 3 7

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.
The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.

Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)

	Fixed Cost Component	Variable Cost 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

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

The unit selling price of the wiring harness assembly is $110.
In February, the company plans to purchase land for future expansion. The land costs $68,000.
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.

Required:

Prepare a monthly operating budget for the first quarter with the following schedules:

6. Selling and administrative expense budget. Round your answers to the nearest cent, if required.

	January	February	March	Total
Planned sales	fill in the blank e495d5fc3ff9fd6_1	fill in the blank e495d5fc3ff9fd6_2	fill in the blank e495d5fc3ff9fd6_3	fill in the blank e495d5fc3ff9fd6_4
Variable selling & administrative expense per unit	$fill in the blank e495d5fc3ff9fd6_5	$fill in the blank e495d5fc3ff9fd6_6	$fill in the blank e495d5fc3ff9fd6_7	$fill in the blank e495d5fc3ff9fd6_8
Total variable expense	$fill in the blank e495d5fc3ff9fd6_9	$fill in the blank e495d5fc3ff9fd6_10	$fill in the blank e495d5fc3ff9fd6_11	$fill in the blank e495d5fc3ff9fd6_12
Fixed selling & administrative expense:
Salaries	$fill in the blank e495d5fc3ff9fd6_13	$fill in the blank e495d5fc3ff9fd6_14	$fill in the blank e495d5fc3ff9fd6_15	$fill in the blank e495d5fc3ff9fd6_16
Depreciation	fill in the blank e495d5fc3ff9fd6_17	fill in the blank e495d5fc3ff9fd6_18	fill in the blank e495d5fc3ff9fd6_19	fill in the blank e495d5fc3ff9fd6_20
Other	fill in the blank e495d5fc3ff9fd6_21	fill in the blank e495d5fc3ff9fd6_22	fill in the blank e495d5fc3ff9fd6_23	fill in the blank e495d5fc3ff9fd6_24
Total fixed expenses	$fill in the blank e495d5fc3ff9fd6_25	$fill in the blank e495d5fc3ff9fd6_26	$fill in the blank e495d5fc3ff9fd6_27	$fill in the blank e495d5fc3ff9fd6_28
Total selling & administrative expenses	$fill in the blank e495d5fc3ff9fd6_29	$fill in the blank e495d5fc3ff9fd6_30	$fill in the blank e495d5fc3ff9fd6_31	$fill in the blank e495d5fc3ff9fd6_32

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Direct Material	Per-Unit Usage	Unit Cost
Part #K298	2	$4
Part #C30	3	7