Problem 8.36 Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces
ID: 2491014 • Letter: P
Question
Problem 8.36
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.
The following data pertain to production policies and manufacturing specifications followed by Ponderosa:
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.
Required:
Prepare a monthly operating budget for the first quarter with the following schedules
9. Budgeted income statement (ignore income taxes)
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10. Cash budget
Enter a negative balance as a negative amount, and if an amount is zero enter "0".
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Sales $ Less: Cost of goods sold Gross margin $ Less: Selling and administrative expense Income before income taxes $Explanation / Answer
9.
Budgeted income statement
Sales (Schedule 1)
$36,85,000
Less: Cost of goods sold (Schedule 8)
$26,26,687
Gross margin
$10,58,313
Less: Selling and administrative expense (Schedule 6)
$9,72,600
Income before income taxes
$85,713
Schedule 1: Sales budget
January
February
March
Total
Units
10,000
10,500
13,000
33,500
Unit selling price
$110
$110
$110
$110
Sales
$11,00,000
$11,55,000
$14,30,000
$36,85,000
Schedule 2: Production budget
January
February
March
Total
Unit sales (Schedule 1)
10,000
10,500
13,000
33,500
Desired ending inventory
2,100
2,600
3,200
3,200
Total needed
12,100
13,100
16,200
36,700
Less: Beginning inventory
900
2,100
2,600
900
Units produced
11,200
11,000
13,600
35,800
Schedule 3: Direct materials purchases budget (Assumes May sales equal April sales in units)
January
February
March
Total
Part K29
Part C30
Part K29
Part C30
Part K29
Part C30
Part K29
Part C30
Units produced
11,200
11,200
11,000
11,000
13,600
13,600
35,800
35,800
Dir. mat. per unit
2
3
2
3
2
3
2
3
Production needs
22,400
33,600
22,000
33,000
27,200
40,800
71,600
1,07,400
Desired EI
6,600
9,900
8,160
12,240
9,900
14,850
9,900
14,850
Total needed
29,000
43,500
30,160
45,240
37,100
55,650
81,500
1,22,250
Less: BI
6,720
10,080
6,600
9,900
8,160
12,240
6,720
10,080
Dir. mat. to purchase
22,280
33,420
23,560
35,340
28,940
43,410
74,780
1,12,170
Cost per unit
$4
$7
$4
$7
$4
$7
$4
$7
Total purchase cost
89,120
$2,33,940
94,240
$2,47,380
$1,15,760
$3,03,870
$2,99,120
$7,85,190
Schedule 4: Direct labor budget
January
February
March
Total
Units to be produced
(Schedule 2)
11,200
11,000
13,600
35,800
Direct labor time per
unit (hrs.)
1.5
1.5
1.5
1.5
Total hours needed
16,800
16,500
20,400
53,700
Wages per hour
$20
$20
$20
$20
Total direct labor cost
$3,36,000
$3,30,000
$4,08,000
$10,74,000
Schedule 5: Overhead budget
January
February
March
Total
Budgeted direct labor hours (Schedule 4)
16,800
16,500
20,400
53,700
Variable overhead rate
$3.90
$3.90
$3.90
$3.90
Budgeted var. overhead
65,520
$64,350
$79,560
$2,09,430
Budgeted fixed overhead
1,61,800
1,61,800
1,61,800
4,85,400
Total overhead cost
$2,27,320
$2,26,150
$2,41,360
$6,94,830
Schedule 6: Selling and administrative expense budget
January
February
March
Total
Planned sales (Schedule 1)
10,000
10,500
13,000
33,500
Variable selling & administrative expense per unit
$6.60
$6.60
$6.60
$6.60
Total variable expense
66,000
69,300
$85,800
$2,21,100
Fixed selling & administrative expense:
Salaries
88,500
88,500
88,500
2,65,500
Depreciation
25,000
25,000
25,000
75,000
Other
1,37,000
1,37,000
1,37,000
4,11,000
Total fixed expenses
2,50,500
2,50,500
2,50,500
$7,51,500
Total selling & administrative exp.
$3,16,500
$3,19,800
$3,36,300
$9,72,600
Schedule 7: Ending finished goods inventory budget
Unit cost computation:
Direct materials:
Part K29 (2 × $4)
$8.00
Part C30 (3 × $7)
$21.00
Direct labor (1.5 × $20)
$30.00
Overhead:
Variable (1.5 × $485,000/53,700)
$5.85
Fixed (1.5 × $9.04)*
$13.56
Total unit cost
$78.41
Finished goods (units)
3200
Total value of finished goods
$2,50,912.00
Schedule 8: Cost of goods sold budget
Direct materials used (Schedule 3):
Part K29 (71,600 × $4.00)
$2,86,400
Part C30 (107,400 × $7.00)
$7,51,800
$10,38,200
Direct labor used (Schedule 4)
$10,74,000
Overhead (Schedule 5)
$6,94,830
Budgeted manufacturing costs
$28,07,030
Add: Beginning finished goods (900 × $78.41)
$70,569
Goods available for sale
$28,77,599
Less: Ending finished goods (Schedule 7)
$2,50,912
Budgeted cost of goods sold
$26,26,687
10.
Cash budget
January
February
March
Total
Beginning balance
$62,900
$30,020
$25,450
$62,900
Cash receipts
$11,00,000
$11,55,000
$14,30,000
$36,85,000
Total cash available
$11,62,900
$11,85,020
$14,55,450
$37,47,900
Disbursements:
Purchases
$3,23,060
$3,41,620
$4,19,630
$10,84,310
DL payroll
$3,36,000
$3,30,000
$4,08,000
$10,74,000
Overhead*
$1,82,320
$1,81,150
$1,96,360
$5,59,830
Marketing & admin.(excluding depreciation)
$2,91,500
$2,94,800
$3,11,300
$8,97,600
Land
$68,000
$68,000
Total disbursements
$11,32,880
$12,15,570
$13,35,290
$36,83,740
Ending balance
$30,020
-$30,550
$1,20,160
$64,160
Financing:
Borrowed/repaid
$0
$56,000
-$56,000
$0
Interest paid
$0
$0
-$560
-$560
Ending cash balance
$30,020
$25,450
$63,600
$63,600
Budgeted income statement
Sales (Schedule 1)
$36,85,000
Less: Cost of goods sold (Schedule 8)
$26,26,687
Gross margin
$10,58,313
Less: Selling and administrative expense (Schedule 6)
$9,72,600
Income before income taxes
$85,713