Operating Budget, Comprehensive AnalysisPonderosa, 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.January10,000February10,600March13,300April16,000May18,500The 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 MaterialPer-Unit UsageUnit CostPart #K2982 $4 Part #C303 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 $20.Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Fixed CostComponentVariable CostComponentSupplies$ — $1.00 Power— 0.20 Maintenance12,500 1.10 Supervision14,000 — Depreciation45,000 — Taxes4,300 — Other86,000 1.60 Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.) Fixed CostsVariable CostsSalaries$ 88,600 — Commissions— $1.40 Depreciation25,000 — Shipping— 3.60 Other137,000 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. 2. Production budgetJanuaryFebruaryMarchTotalUnit sales10,00010,60013,30033,900Desired ending inventory2,1202,6603,2003,200Total needed12,12013,26016,50037,100Less: Beginning inventory-2,120-900-2,660-900Units produced11,22011,140 V13,84036,200FeedbackTCheck My WorkSee Cornerstone 8.2.3. Direct materials purchases budgetJanuaryFebruaryMarchTotalPart K298Part C30Part K298Part C30Part K298Part C30Part K298Part C30Units produced11,22011,22011,14011,14013,84013,84036,20036,200Dir. mat. per unitProduction22,44033,66022,28033,42027,68041,52072,400 V108,600пeedsDesired EI6,68410,0268,30412,4569,90014,8509,90014,850Total needed29,12443,68630,58445,87637,58056,37082,300123,450Less: BI-6,732-10,098-6,684-10,026-8,304-12,456-6,732-10,098Dir. mat. to22,39233,58823,90035,85029,276 V43,91475,568113,352purchaseCost per unit77747Total purchase89,568235,11695,600 V250,950117,104 V307,398302,272 V793,464cost 8. Cost of goods sold budgetDirect materials usedPart K298Part C30Direct labor usedOverheadBudgeted manufacturingcostsAdd: Beginning finished goodsGoods available for saleLess: Ending finished goodsBudgeted cost of goodssoldFoedback9. Budgeted income statement (ignore income taxes)SalesLess: Cost of goods soldGross marginLess: Selling and administrative expenseIncome before income taxes

8. Cost of goods sold budget: Particulars Details Amount Direct Material Used :…

Answered: 8. Cost of goods sold budget

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 35E: The budget that adjusts unit sales for beginning and ending inventories of finished goods is the: a....

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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.

January	10,000
February	10,600
March	13,300
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.

2. Production budget
January
February
March
Total
Unit sales
10,000
10,600
13,300
33,900
Desired ending inventory
2,120
2,660
3,200
3,200
Total needed
12,120
13,260
16,500
37,100
Less: Beginning inventory
-2,120
-900
-2,660
-900
Units produced
11,220
11,140 V
13,840
36,200
Feedback
TCheck My Work
See Cornerstone 8.2.
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
11,220
11,220
11,140
11,140
13,840
13,840
36,200
36,200
Dir. mat. per unit
Production
22,440
33,660
22,280
33,420
27,680
41,520
72,400 V
108,600
пeeds
Desired EI
6,684
10,026
8,304
12,456
9,900
14,850
9,900
14,850
Total needed
29,124
43,686
30,584
45,876
37,580
56,370
82,300
123,450
Less: BI
-6,732
-10,098
-6,684
-10,026
-8,304
-12,456
-6,732
-10,098
Dir. mat. to
22,392
33,588
23,900
35,850
29,276 V
43,914
75,568
113,352
purchase
Cost per unit
7
7
7
4
7
Total purchase
89,568
235,116
95,600 V
250,950
117,104 V
307,398
302,272 V
793,464
cost

8. Cost of goods sold budget
Direct materials used
Part K298
Part C30
Direct labor used
Overhead
Budgeted manufacturing
costs
Add: Beginning finished goods
Goods available for sale
Less: Ending finished goods
Budgeted cost of goods
sold
Foedback
9. Budgeted income statement (ignore income taxes)
Sales
Less: Cost of goods sold
Gross margin
Less: Selling and administrative expense
Income before income taxes

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