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 13,600 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 12,600 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 $62,800. 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: Question Content Area 1. Sales budget January February March Total Units fill in the blank e20de1f84fc504e_1 fill in the blank e20de1f84fc504e_2 fill in the blank e20de1f84fc504e_3 fill in the blank e20de1f84fc504e_4 Unit selling price $fill in the blank e20de1f84fc504e_5 $fill in the blank e20de1f84fc504e_6 $fill in the blank e20de1f84fc504e_7 $fill in the blank e20de1f84fc504e_8 Sales $fill in the blank e20de1f84fc504e_9 $fill in the blank e20de1f84fc504e_10 $fill in the blank e20de1f84fc504e_11 $fill in the blank e20de1f84fc504e_12 Question Content Area 2. Production budget January February March Total Unit sales fill in the blank 91a0a4073fc804c_1 fill in the blank 91a0a4073fc804c_2 fill in the blank 91a0a4073fc804c_3 fill in the blank 91a0a4073fc804c_4 Desired ending inventory fill in the blank 91a0a4073fc804c_5 fill in the blank 91a0a4073fc804c_6 fill in the blank 91a0a4073fc804c_7 fill in the blank 91a0a4073fc804c_8 Total needed fill in the blank 91a0a4073fc804c_9 fill in the blank 91a0a4073fc804c_10 fill in the blank 91a0a4073fc804c_11 fill in the blank 91a0a4073fc804c_12 Less: Beginning inventory fill in the blank 91a0a4073fc804c_13 fill in the blank 91a0a4073fc804c_14 fill in the blank 91a0a4073fc804c_15 fill in the blank 91a0a4073fc804c_16 Units produced fill in the blank 91a0a4073fc804c_17 fill in the blank 91a0a4073fc804c_18 fill in the blank 91a0a4073fc804c_19 fill in the blank 91a0a4073fc804c_20

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 13,600 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 12,600 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 $62,800. 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: Question Content Area 1. Sales budget January February March Total Units fill in the blank e20de1f84fc504e_1 fill in the blank e20de1f84fc504e_2 fill in the blank e20de1f84fc504e_3 fill in the blank e20de1f84fc504e_4 Unit selling price $fill in the blank e20de1f84fc504e_5 $fill in the blank e20de1f84fc504e_6 $fill in the blank e20de1f84fc504e_7 $fill in the blank e20de1f84fc504e_8 Sales $fill in the blank e20de1f84fc504e_9 $fill in the blank e20de1f84fc504e_10 $fill in the blank e20de1f84fc504e_11 $fill in the blank e20de1f84fc504e_12 Question Content Area 2. Production budget January February March Total Unit sales fill in the blank 91a0a4073fc804c_1 fill in the blank 91a0a4073fc804c_2 fill in the blank 91a0a4073fc804c_3 fill in the blank 91a0a4073fc804c_4 Desired ending inventory fill in the blank 91a0a4073fc804c_5 fill in the blank 91a0a4073fc804c_6 fill in the blank 91a0a4073fc804c_7 fill in the blank 91a0a4073fc804c_8 Total needed fill in the blank 91a0a4073fc804c_9 fill in the blank 91a0a4073fc804c_10 fill in the blank 91a0a4073fc804c_11 fill in the blank 91a0a4073fc804c_12 Less: Beginning inventory fill in the blank 91a0a4073fc804c_13 fill in the blank 91a0a4073fc804c_14 fill in the blank 91a0a4073fc804c_15 fill in the blank 91a0a4073fc804c_16 Units produced fill in the blank 91a0a4073fc804c_17 fill in the blank 91a0a4073fc804c_18 fill in the blank 91a0a4073fc804c_19 fill in the blank 91a0a4073fc804c_20

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 62E: Flexible Budget for Various Levels of Production Budgeted amounts for the year: Required: 1. Prepare...

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Question Content Area

1. Sales budget

	January	February	March	Total
Units	fill in the blank e20de1f84fc504e_1	fill in the blank e20de1f84fc504e_2	fill in the blank e20de1f84fc504e_3	fill in the blank e20de1f84fc504e_4
Unit selling price	$fill in the blank e20de1f84fc504e_5	$fill in the blank e20de1f84fc504e_6	$fill in the blank e20de1f84fc504e_7	$fill in the blank e20de1f84fc504e_8
Sales	$fill in the blank e20de1f84fc504e_9	$fill in the blank e20de1f84fc504e_10	$fill in the blank e20de1f84fc504e_11	$fill in the blank e20de1f84fc504e_12

Question Content Area

2. Production budget

	January	February	March	Total
Unit sales	fill in the blank 91a0a4073fc804c_1	fill in the blank 91a0a4073fc804c_2	fill in the blank 91a0a4073fc804c_3	fill in the blank 91a0a4073fc804c_4
Desired ending inventory	fill in the blank 91a0a4073fc804c_5	fill in the blank 91a0a4073fc804c_6	fill in the blank 91a0a4073fc804c_7	fill in the blank 91a0a4073fc804c_8
Total needed	fill in the blank 91a0a4073fc804c_9	fill in the blank 91a0a4073fc804c_10	fill in the blank 91a0a4073fc804c_11	fill in the blank 91a0a4073fc804c_12
Less: Beginning inventory	fill in the blank 91a0a4073fc804c_13	fill in the blank 91a0a4073fc804c_14	fill in the blank 91a0a4073fc804c_15	fill in the blank 91a0a4073fc804c_16
Units produced	fill in the blank 91a0a4073fc804c_17	fill in the blank 91a0a4073fc804c_18	fill in the blank 91a0a4073fc804c_19	fill in the blank 91a0a4073fc804c_20

5. Overhead budget. Round your answers to two decimal places, if required.
January
February
March
Total
Budgeted direct labor hours
Variable overhead rate
Budgeted var. overhead
Budgeted fixed overhead
Total overhead cost
$
6. Selling and administrative expense budget. Round your answers to the nearest cent, if required.
January
February
March
Planned sales
Variable selling & administrative expense per unit
Total variable expense
Fixed selling & administrative expense:
Salaries
Depreciation
Other
Total fixed expenses
Total selling & administrative expenses
+A
tA
69
tA
Total

3. Direct materials purchases budget
Units produced
Dir. mat. per unit
Desired EI
Part K298
Production needs
Total needed
Dir. mat. to purchase
$
Total purchase cost
4. Direct labor budget. Round your answers to two decimal places, if required.
January
February
Units to be produced
Direct labor time per unit (hrs.)
Total hours needed
Total direct labor cost
Less: BI
Cost per unit
January
Wages per hour
Part K298
February
Part C30
Part C30
March
Part K298
$
Total
March
Part C30
Part K298
Total
Part C30

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

	Fixed Cost Component	Variable Cost Component
Supplies	$ —	$1.00
Power	—	0.20
Maintenance	12,600	1.10
Supervision	14,000	—
Depreciation	45,000	—
Taxes	4,300	—
Other	86,000	1.60

	Fixed Costs	Variable Costs
Salaries	$ 88,500	—
Commissions	—	$1.40
Depreciation	25,000	—
Shipping	—	3.60
Other	137,000	1.60