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: Prepare a monthly operating budget for the first quarter with the following schedules: 1. Sales budget January February March Total Units fill in the blank fill in the blank fill in the blank fill in the blank Unit selling price $fill in the blank $fill in the blank $fill in the blank $fill in the blank Sales $fill in the blank $fill in the blank $fill in the blank $fill in the blank 2. Production budget January February March Total Unit sales fill in the blank fill in the blank fill in the blank fill in the blank Desired ending inventory 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 Less: Beginning inventory fill in the blank fill in the blank fill in the blank fill in the blank Units produced 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: Prepare a monthly operating budget for the first quarter with the following schedules: 1. Sales budget January February March Total Units fill in the blank fill in the blank fill in the blank fill in the blank Unit selling price $fill in the blank $fill in the blank $fill in the blank $fill in the blank Sales $fill in the blank $fill in the blank $fill in the blank $fill in the blank 2. Production budget January February March Total Unit sales fill in the blank fill in the blank fill in the blank fill in the blank Desired ending inventory 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 Less: Beginning inventory fill in the blank fill in the blank fill in the blank fill in the blank Units produced fill in the blank fill in the blank fill in the blank fill in the blank

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter3: Process Cost Systems

Section: Chapter Questions

Problem 1MAD: Dura-Conduit Corporation manufactures plastic conduit that is used in the cable industry. A conduit...

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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:

Prepare a monthly operating budget for the first quarter with the following schedules:

1. Sales budget

	January	February	March	Total
Units	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Unit selling price	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
Sales	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank

2. Production budget

	January	February	March	Total
Unit sales	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Desired ending inventory	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
Less: Beginning inventory	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Units produced	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