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 13,900 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 $ 88,600 — 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 Required: 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 fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Dir. mat. per unit fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Production needs fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Desired EI fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Total needed fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Less: BI fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Dir. mat. to purchase fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Cost per unit $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank Total purchase cost $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank

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 13,900 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 $ 88,600 — 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 Required: 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 fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Dir. mat. per unit fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Production needs fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Desired EI fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Total needed fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Less: BI fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Dir. mat. to purchase fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank fill in the blank Cost per unit $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank Total purchase cost $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank $fill in the blank

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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Question

January	10,000
February	10,500
March	13,900
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	$ 88,600	—
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

Required:

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	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Dir. mat. per unit	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Production needs	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Desired EI	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Total needed	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Less: BI	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Dir. mat. to purchase	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Cost per unit	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
Total purchase cost	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank

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