Prepare a monthly operating budget for the first quarter with the following schedule

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 (5)

  1. The unit selling price of the wiring harness assembly is $110.
  2. In February, the company plans to purchase land for future expansion. The land costs $68,000.
  3. 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:

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
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
☐☐☐☐
[[[[
Total
Transcribed Image Text: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 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 ☐☐☐☐ [[[[ Total
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
13,000
April
16,000
May
18,500
The following data pertain to production policies and manufacturing specifications followed by Ponderosa:
a. 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.
b. The data on materials used are as follows:
Direct Material Per-Unit Usage Unit Cost
Part #K298
2
3
$4
7
Part #C30
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.
c. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.
d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)
Variable Cost
Fixed Cost
Component
$
Component
Supplies
$1.00
Power
0.20
Maintenance
12,500
1.10
Supervision
14,000
Depreciation
45,000
Taxes
4,300
86,000
Other
1.60
e. 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
Transcribed Image Text: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 13,000 April 16,000 May 18,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: a. 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. b. The data on materials used are as follows: Direct Material Per-Unit Usage Unit Cost Part #K298 2 3 $4 7 Part #C30 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. c. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20. d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Variable Cost Fixed Cost Component $ Component Supplies $1.00 Power 0.20 Maintenance 12,500 1.10 Supervision 14,000 Depreciation 45,000 Taxes 4,300 86,000 Other 1.60 e. 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
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