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 13,500 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 $ 88,500 — 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 $62,700. 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: 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced fill in the blank 2f8dbef74fcefbf_1 fill in the blank 2f8dbef74fcefbf_2 fill in the blank 2f8dbef74fcefbf_3 fill in the blank 2f8dbef74fcefbf_4 Direct labor time per unit (hrs.) fill in the blank 2f8dbef74fcefbf_5 fill in the blank 2f8dbef74fcefbf_6 fill in the blank 2f8dbef74fcefbf_7 fill in the blank 2f8dbef74fcefbf_8 Total hours needed fill in the blank 2f8dbef74fcefbf_9 fill in the blank 2f8dbef74fcefbf_10 fill in the blank 2f8dbef74fcefbf_11 fill in the blank 2f8dbef74fcefbf_12 Wages per hour $fill in the blank 2f8dbef74fcefbf_13 $fill in the blank 2f8dbef74fcefbf_14 $fill in the blank 2f8dbef74fcefbf_15 $fill in the blank 2f8dbef74fcefbf_16 Total direct labor cost $fill in the blank 2f8dbef74fcefbf_17 $fill in the blank 2f8dbef74fcefbf_18

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 13,500 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 $ 88,500 — 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 $62,700. 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: 4. Direct labor budget. Round your answers to two decimal places, if required. January February March Total Units to be produced fill in the blank 2f8dbef74fcefbf_1 fill in the blank 2f8dbef74fcefbf_2 fill in the blank 2f8dbef74fcefbf_3 fill in the blank 2f8dbef74fcefbf_4 Direct labor time per unit (hrs.) fill in the blank 2f8dbef74fcefbf_5 fill in the blank 2f8dbef74fcefbf_6 fill in the blank 2f8dbef74fcefbf_7 fill in the blank 2f8dbef74fcefbf_8 Total hours needed fill in the blank 2f8dbef74fcefbf_9 fill in the blank 2f8dbef74fcefbf_10 fill in the blank 2f8dbef74fcefbf_11 fill in the blank 2f8dbef74fcefbf_12 Wages per hour $fill in the blank 2f8dbef74fcefbf_13 $fill in the blank 2f8dbef74fcefbf_14 $fill in the blank 2f8dbef74fcefbf_15 $fill in the blank 2f8dbef74fcefbf_16 Total direct labor cost $fill in the blank 2f8dbef74fcefbf_17 $fill in the blank 2f8dbef74fcefbf_18

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 5E: Production budget Healthy Measures Inc. produces a Bath and Gym version of its popular electronic...

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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	13,500
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	$ 88,500	—
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 $62,700. 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:

4. Direct labor budget. Round your answers to two decimal places, if required.

	January	February	March	Total
Units to be produced	fill in the blank 2f8dbef74fcefbf_1	fill in the blank 2f8dbef74fcefbf_2	fill in the blank 2f8dbef74fcefbf_3	fill in the blank 2f8dbef74fcefbf_4
Direct labor time per unit (hrs.)	fill in the blank 2f8dbef74fcefbf_5	fill in the blank 2f8dbef74fcefbf_6	fill in the blank 2f8dbef74fcefbf_7	fill in the blank 2f8dbef74fcefbf_8
Total hours needed	fill in the blank 2f8dbef74fcefbf_9	fill in the blank 2f8dbef74fcefbf_10	fill in the blank 2f8dbef74fcefbf_11	fill in the blank 2f8dbef74fcefbf_12
Wages per hour	$fill in the blank 2f8dbef74fcefbf_13	$fill in the blank 2f8dbef74fcefbf_14	$fill in the blank 2f8dbef74fcefbf_15	$fill in the blank 2f8dbef74fcefbf_16
Total direct labor cost	$fill in the blank 2f8dbef74fcefbf_17	$fill in the blank 2f8dbef74fcefbf_18

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