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:January40,000February50,000March60,000April60,000May62,000The 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 $166.06. The desired ending inventory for each month is 80% of the next month's sales.The data on materials used are as follows: Direct MaterialPer-Unit UsageDM Unit Cost ($)Metal10 lbs.8Components65Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next month's production needs. This is exactly the amount of material on hand on December 31 of the prior year.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-CostComponent ($)Supplies—1.00Power—0.50Maintenance30,0000.40Supervision16,000—Depreciation200,000—Taxes12,000—Other80,0000.50Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) Fixed Costs ($)VariableCosts ($)Salaries50,000—Commissions—2.00Depreciation40,000—Shipping—1.00Other20,0000.60The 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.)a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer. Allison ManufacturingSales BudgetFor the Quarter Ended March 31 JanuaryFebruaryMarchTotalUnits Selling price$$$$Sales$$$$ Feedback Correctb. Schedule 2: Production Budget. Allison ManufacturingProduction BudgetFor the Quarter Ended March 31 JanuaryFebruaryMarchTotalSales Desired ending inventory Total needs Less: Beginning inventory Units to be produced Feedback Partially correctc. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer. Allison ManufacturingDirect Materials Purchases BudgetFor the Quarter Ended March 31 January MetalJanuary ComponentsFebruary MetalFebruary ComponentsMarch MetalMarch ComponentsTotal MetalTotal ComponentsUnits to be produced Direct materials per unit Production needs Desired ending inventory Total needs Less: Beginning inventory Direct materials to be purchased Cost per unit$$$$$$$$Total cost$$$$$$$$ Feedback Partially correctd. Schedule 4: Direct Labor Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison ManufacturingDirect Labor BudgetFor the Quarter Ended March 31 JanuaryFebruaryMarchTotalUnits to be produced Direct labor time per unit (hours) Total hours needed Cost per hour$$$$Total cost$$$$e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.Allison ManufacturingOverhead BudgetFor the Quarter Ended March 31 JanuaryFebruaryMarchTotalBudgeted direct labor hours Variable overhead rate$$$$Budgeted variable overhead$$$$Budgeted fixed overhead Total overhead$$$$f. Schedule 6: Selling and Administrative Expenses Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer. Allison ManufacturingSelling and Administrative Expenses BudgetFor the Quarter Ended March 31 JanuaryFebruaryMarchTotalPlanned sales Variable selling and administrative expenses per unit$$$$Total variable expense$$$$Fixed selling and administrative expenses: Salaries$$$$Depreciation Other Total fixed expenses$$$$Total selling and administrative expenses$$$$ Feedback Partially correctg. Schedule 7: Ending Finished Goods Inventory Budget. If required, round amounts to the nearest cent. Allison ManufacturingEnding Finished Goods Inventory BudgetFor the Quarter Ended March 31Unit cost computation: Direct materials: Metal$ Components $Direct labor Overhead: Variable Fixed Total unit cost $Finished goods inventory $
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
Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next month's production needs. This is exactly the amount of material on hand on December 31 of the prior year.
The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25.
Fixed-Cost
Component ($)
Variable-Cost
Component ($)
Supplies
—
1.00
Power
—
0.50
Maintenance
30,000
0.40
Supervision
16,000
—
200,000
—
Taxes
12,000
—
Other
80,000
0.50
Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.)
Fixed
Costs ($)
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.)
a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing
Sales Budget
For the Quarter Ended March 31
January
February
March
Total
Units
Selling price
$
$
$
$
Sales
$
$
$
$
Feedback
Correct
b. Schedule 2: Production Budget.
Allison Manufacturing
Production Budget
For the Quarter Ended March 31
January
February
March
Total
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units to be produced
Feedback
Partially correct
c. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing
Direct Materials Purchases Budget
For the Quarter Ended March 31
January Metal
January Components
February Metal
February Components
March Metal
March Components
Total Metal
Total Components
Units to be produced
Direct materials per unit
Production needs
Desired ending inventory
Total needs
Less: Beginning inventory
Direct materials to be purchased
Cost per unit
$
$
$
$
$
$
$
$
Total cost
$
$
$
$
$
$
$
$
Feedback
Partially correct
d. Schedule 4: Direct Labor Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing
Direct Labor Budget
For the Quarter Ended March 31
January
February
March
Total
Units to be produced
Direct labor time per unit (hours)
Total hours needed
Cost per hour
$
$
$
$
Total cost
$
$
$
$
e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing
Overhead Budget
For the Quarter Ended March 31
January
February
March
Total
Budgeted direct labor hours
Variable overhead rate
$
$
$
$
Budgeted variable overhead
$
$
$
$
Budgeted fixed overhead
Total overhead
$
$
$
$
f. Schedule 6: Selling and Administrative Expenses Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
Allison Manufacturing
Selling and Administrative Expenses Budget
For the Quarter Ended March 31
January
February
March
Total
Planned sales
Variable selling and administrative expenses per unit
$
$
$
$
Total variable expense
$
$
$
$
Fixed selling and administrative expenses:
Salaries
$
$
$
$
Depreciation
Other
Total fixed expenses
$
$
$
$
Total selling and administrative expenses
$
$
$
$
Feedback
Partially correct
g. Schedule 7: Ending Finished Goods Inventory Budget. If required, round amounts to the nearest cent.
Allison Manufacturing
Ending Finished Goods Inventory Budget
For the Quarter Ended March 31
Unit cost computation:
Direct materials:
Metal
$
Components
$
Direct labor
Overhead:
Variable
Fixed
Total unit cost
$
Finished goods inventory
$
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