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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 13,600 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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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 13,600
April 16,000
May 18,500

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

  1. 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.
  2. 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.

  3. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.
  4. 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            
  5. 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            
  6. The unit selling price of the wiring harness assembly is $110.
  7. In February, the company plans to purchase land for future expansion. The land costs $68,000.
  8. 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
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
Transcribed Image Text: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
Transcribed Image Text: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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