Operating Budget, Comprehensive Analysis (5)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: 9. Budgeted income statement (ignore income taxes)SalesLess: Cost of goods soldGross marginLess: Selling and administrative expenseIncome before income taxes10. Cash budgetEnter a negative balance as a negative amount, and if an amount is zero enter "0".JanuaryFebruaryMarchBeginning balanceCash receiptsTotal cashavailableDisbursements:PurchasesDL payrollOverheadMarketing &adminLandTotal disbursementsEnding balanceFinancing:Borrowed/repaidInterest paidEnding 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 aregiven below.January10,000February10,600March13,000April16,000May18,500The 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 CostPart #K29823$47Part #C30Inventory 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 $20.d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)Variable CostFixed CostComponent$ComponentSupplies$1.00Power0.20Maintenance12,5001.10Supervision14,000Depreciation45,000Taxes4,30086,000Other1.60e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)Fixed CostsVariable CostsSalaries$ 88,500-Commissions$1.40Depreciation25,000Shipping3.60Other137,0001.60

Budget is a estimation for the forecast within a certain period of times. As there are various…

Answered: Prepare a monthly operating budget for…

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)

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:

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

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