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 13,700 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 #1298 2 $4 7 Part C30 3 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- $1.00 0.20 Power 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 $1.40 Commissions Depreciation 25.000 Shipping 3.60 Other 137,000 1.60 f. The unit selling price of the wiring hamess 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 $62.900. 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 S repaid the following month, as is the interest due. The interest rate is 12 percent per annum. Required:
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 13,700 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 #1298 2 $4 7 Part C30 3 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- $1.00 0.20 Power 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 $1.40 Commissions Depreciation 25.000 Shipping 3.60 Other 137,000 1.60 f. The unit selling price of the wiring hamess 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 $62.900. 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 S repaid the following month, as is the interest due. The interest rate is 12 percent per annum. Required:
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
Problem 4CMA: Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold...
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text: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
13,700
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 #1298
2
$4
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.
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
$-
$1.00
Supplies
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 $62.900. 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 a
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:
Transcribed Image Text:3. Direct materials purchases budget
Part K298
Units produced
Dir. mat. per unit
Production
needs
Desired EI
Total needed
Dir. mat. to
Less: BI
purchase
Cost per unit
January
X
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
Wages per hour
X
X
Part C30
February
X
X
X
Part K298
Part C30
March
X
X
X
Part K298
Total
March
X
X
X
X
Part C30
Part K298
Total
X
X
Part C30
X
X
X
X
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