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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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:

  1. 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.
  2. 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.

  3. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20.
  4. 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            
  5. 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            
  6. The unit selling price of the wiring harness assembly is $110.
  7. In February, the company plans to purchase land for future expansion. The land costs $68,000.
  8. 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.
### Inventory Budget Calculation

**Ending Finished Goods Inventory Budget**

**Instructions:**
Round intermediate calculations to the nearest cent. If required, round your answers to the nearest cent.

**Unit Cost Computation:**

- **Direct Materials:**
  - Part K298: $_____
  - Part C30: $_____
  - Direct Labor: $_____

- **Overhead:**
  - Variable: $_____
  - Fixed: $_____

- **Total Unit Cost: $_____**

- **Number of Units: $_____**

- **Finished Goods: $_____**
Transcribed Image Text:### Inventory Budget Calculation **Ending Finished Goods Inventory Budget** **Instructions:** Round intermediate calculations to the nearest cent. If required, round your answers to the nearest cent. **Unit Cost Computation:** - **Direct Materials:** - Part K298: $_____ - Part C30: $_____ - Direct Labor: $_____ - **Overhead:** - Variable: $_____ - Fixed: $_____ - **Total Unit Cost: $_____** - **Number of Units: $_____** - **Finished Goods: $_____**
## Overhead Budget

### Instructions:
Round your answers to two decimal places, if required.

### Budget Table
- **Columns:**
  - January
  - February
  - March
  - Total

- **Rows:**
  1. **Budgeted Direct Labor Hours**: Input fields for each month and total.
  2. **Variable Overhead Rate**: Input fields for each month and total.
  3. **Budgeted Variable Overhead**: Calculated by multiplying the budgeted direct labor hours by the variable overhead rate for each month and total.
  4. **Budgeted Fixed Overhead**: Input fields for each month and total.
  5. **Total Overhead Cost**: Sum of budgeted variable overhead and budgeted fixed overhead for each month and total.

**Feedback Button**: Allows users to check their calculations.

---

## Selling and Administrative Expense Budget

### Instructions:
Round your answers to the nearest cent, if required.

### Budget Table
- **Columns:**
  - January
  - February
  - March
  - Total

- **Rows:**
  1. **Planned Sales**: Input fields for each month and total.
  2. **Variable Selling & Administrative Expense per Unit**: Input fields for each month and total.
  3. **Total Variable Expense**: Computed by multiplying planned sales by variable expense per unit for each month and total.
  4. **Fixed Selling & Administrative Expenses:**
     - **Salaries**: Input fields for each month and total.
     - **Depreciation**: Input fields for each month and total.
     - **Other**: Input fields for each month and total.
  5. **Total Fixed Expenses**: Sum of all fixed expenses (salaries, depreciation, other) for each month and total.
  6. **Total Selling & Administrative Expenses**: Sum of total variable expenses and total fixed expenses for each month and total.

**Feedback Button**: Allows users to verify their entries and calculations.

---
Transcribed Image Text:## Overhead Budget ### Instructions: Round your answers to two decimal places, if required. ### Budget Table - **Columns:** - January - February - March - Total - **Rows:** 1. **Budgeted Direct Labor Hours**: Input fields for each month and total. 2. **Variable Overhead Rate**: Input fields for each month and total. 3. **Budgeted Variable Overhead**: Calculated by multiplying the budgeted direct labor hours by the variable overhead rate for each month and total. 4. **Budgeted Fixed Overhead**: Input fields for each month and total. 5. **Total Overhead Cost**: Sum of budgeted variable overhead and budgeted fixed overhead for each month and total. **Feedback Button**: Allows users to check their calculations. --- ## Selling and Administrative Expense Budget ### Instructions: Round your answers to the nearest cent, if required. ### Budget Table - **Columns:** - January - February - March - Total - **Rows:** 1. **Planned Sales**: Input fields for each month and total. 2. **Variable Selling & Administrative Expense per Unit**: Input fields for each month and total. 3. **Total Variable Expense**: Computed by multiplying planned sales by variable expense per unit for each month and total. 4. **Fixed Selling & Administrative Expenses:** - **Salaries**: Input fields for each month and total. - **Depreciation**: Input fields for each month and total. - **Other**: Input fields for each month and total. 5. **Total Fixed Expenses**: Sum of all fixed expenses (salaries, depreciation, other) for each month and total. 6. **Total Selling & Administrative Expenses**: Sum of total variable expenses and total fixed expenses for each month and total. **Feedback Button**: Allows users to verify their entries and calculations. ---
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