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 13,000 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 $62,900. 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 and is repaid the following month, as is the interest due. The interest rate is 12 percent per annum. 3. Direct materials purchases budget January February March Total Part K298 Part C30 Part K298 Part C30 Part K298 Part C30 Part K298 Part C30 Units produced Dir. mat. per unit Production needs Desired EI Total needed Less: BI Dir. mat. to purchase Cost per unit Total purchase cost 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced Direct labor time per unit (hrs.) Total hours needed Wages per hour Total direct labor cost 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

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 13,000 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 $62,900. 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 and is repaid the following month, as is the interest due. The interest rate is 12 percent per annum. 3. Direct materials purchases budget January February March Total Part K298 Part C30 Part K298 Part C30 Part K298 Part C30 Part K298 Part C30 Units produced Dir. mat. per unit Production needs Desired EI Total needed Less: BI Dir. mat. to purchase Cost per unit Total purchase cost 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced Direct labor time per unit (hrs.) Total hours needed Wages per hour Total direct labor cost 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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	10,500
March	13,000
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 $62,900. 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 and is repaid the following month, as is the interest due. The interest rate is 12 percent per annum.

3. Direct materials purchases budget

January	February	March	Total
	Part K298	Part C30	Part K298	Part C30	Part K298	Part C30	Part K298	Part C30
Units produced
Dir. mat. per unit
Production needs
Desired EI
Total needed
Less: BI
Dir. mat. to purchase
Cost per unit
Total purchase cost

4. Direct labor budget. Round your answers to two decimal places, if required.

	January	February	March	Total
Units to be produced
Direct labor time per unit (hrs.)
Total hours needed
Wages per hour
Total direct labor cost

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

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

	January	February	March	Total
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

7. Ending finished goods inventory budget. Round intermediate calculations to the nearest cent. Round your answers to the nearest cent, if required.


Unit cost computation:
Direct materials:
Part K298
Part C30
Direct labor
Overhead:
Variable
Fixed
Total unit cost
Number of units
Finished goods

8. Cost of goods sold budget


Direct materials used
Part K298
Part C30
Direct labor used
Overhead
Budgeted manufacturing costs
Add: Beginning finished goods
Goods available for sale
Less: Ending finished goods
Budgeted cost of goods sold

9. Budgeted income statement (ignore income taxes)


Sales
Less: Cost of goods sold
Gross margin
Less: Selling and administrative expense
Income before income taxes

10. Cash budget
Enter a negative balance as a negative amount, and if an amount is zero enter "0".

	January	February	March	Total
Beginning balance
Cash receipts
Total cash available
Disbursements:
Purchases
DL payroll
Overhead
Marketing & admin
Land
Total disbursements
Ending balance
Financing:
Borrowed/repaid
Interest paid
Ending cash balance

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