2.Operating Budget, Comprehensive Analysis Allison Manufacturing produces a suba
ID: 2566126 • Letter: 2
Question
2.Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming 5 months follow:
January 40,000
February 50,000
March 60,000
April 60,000
May 62,000
The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing:
a. Finished goods inventory on January 1 is 32,000 units, each costing $166.06. The desired ending inventory for each month is 80% of the next month's sales.
b.The data on materials used are as follows:
Direct Material Per-Unit Usage DM Unit Cost ($)
Metal 10 lbs. 8
Components 6 5
Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next month's production needs. This is exactly the amount of material on hand on December 31 of the prior year.
c.The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is $14.25.
d.Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.)
Fixed-Cost Component ($) Variable-Cost Component ($)
Supplies — 1.00
Power — 0.50
Maintenance 30,000 0.40
Supervision 16,000 —
Depreciation 200,000 —
Taxes 12,000 —
Other 80,000 0.50
e.Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.)
Fixed Costs ($) Variable Costs ($)
Salaries 50,000 —
Commissions — 2.00
Depreciation 40,000 —
Shipping — 1.00
Other 20,000 0.60
f. The unit selling price of the subassembly is $205
. g.All sales and purchases are for cash. The cash balance on January 1 equals $400,000. The firm requires a minimum ending balance of $50,000. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 12% per annum. No money is owed at the beginning of January.
Required:
j. Schedule 10: Cash Budget. If an amount is zero, enter "0". Use a minus sign to enter a negative amount.
h. Schedule 8: Cost of Goods Sold Budget.
i. Schedule 9: Budgeted Income Statement. Use a minus sign to indicate a negative amount.
g. Schedule 7: Ending Finished Goods Inventory Budget. If required, round amounts to the nearest cent.
f. Schedule 6: Selling and Administrative Expenses Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
e. Schedule 5: Overhead Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
d. Schedule 4: Direct Labor Budget. If required, round amounts to the nearest cent. Do not include a multiplication symbol as part of your answer.
c. Schedule 3: Direct Materials Purchases Budget. Do not include a multiplication symbol as part of your answer.
b. Schedule 2: Production Budget.
1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.)
a. Schedule 1: Sales Budget. Do not include a multiplication symbol as part of your answer.
$
Allison Manufacturing Cash Budget For the Quarter Ended March 31 January February March Total Beginning balance $ $ $ $ Cash receipts Cash available $ $ $ $ Less Disbursements: Purchases $ $ $ $ Direct labor Overhead Selling & admin. Total $ $ $ $ Tentative ending balance $ $ $ $ Borrowed/repaid Interest paid Ending balance $ $ $ $Explanation / Answer
Required Budgets of Alison manufacturing is as prepared below:
1. Sales Budget Alison manufacturing Sales Budget For the quarter ended March 31 Month Particulars January February March Total Sale Units (a) 40,000 50,000 60,000 150,000 *Price per unit (b) $205 $205 $205 $205 Total Sales $8,200,000 $10,250,000 $12,300,000 30,750,000 2. Production Budget Alison manufacturing Production Budget For the quarter ended March 31 Month Particulars January February March Total April Sale Units (a) 40,000 50,000 60,000 150,000 60000 Planned ending units (b) (80% of next month sales) 40,000 48,000 48,000 136,000 49,600 Beginning units (c ) 32,000 40,000 48,000 120,000 48,000 Planned production units (d)= (a+b-c) 48,000 58,000 60,000 166,000 61,600 3. Raw material Budget Alison manufacturing Raw Material Purchase Budget For the quarter ended March 31 Month Particulars January Metals January Components February Metals February Components March Metals March Components Total Metals Total Components Planned production units (a) 48,000 48,000 58,000 58,000 60,000 60,000 166,000 166,000 *Direct Material required per unit (b) 10.0 6.0 10.0 6.0 10.0 6.0 10.0 6.0 Direct Material Required for production (c ) 480,000 288,000 580,000 348,000 600,000 360,000 1,660,000 996,000 Budgeted ending Direct Material (d) 290,000 174,000 300,000 180,000 308,000 184,800 308,000 184,800 Beginning Direct Material (e ) 240,000 144,000 290,000 174,000 300,000 180,000 240,000 144,000 Budgeted direct material purchase f= c+d-e 530,000 318,000 590,000 354,000 608,000 364,800 1,728,000 1,036,800 Cost per unit (g) $8 $5 $8 $5 $8 $5 $8 $5 BudgetedDM purchases $4,240,000 $1,590,000 $4,720,000 $1,770,000 $4,864,000 $1,824,000 $13,824,000 $5,184,000 4. Direct labour Budget Alison manufacturing Direct Labour Budget For the quarter ended March 31 Month Particulars January February March Total Planned production units (a) 48,000 58,000 60,000 166,000 *Direct labour required per unit (b) 3.0 3.0 3.0 3.0 Budgeted Direct labour hours 144,000 174,000 180,000 498,000 Cost per direct labour hour 14.25 14.25 14.25 14.25 Budgeted Direct labour Cost $2,052,000 $2,479,500 $2,565,000 $7,096,500Related Questions
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