Question

This looks like a lot but I only need to know the solutions to a through d please:

a. The desired ending inventory on schedule 2

b. The desired ending inventory on schedule 3

c. Variable overhead rate on schedule 5

d. Variable overhead rate on schedule 6

Below is the original problem & all of the completed schedules. Thank you!

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 February March April May 10.000 10.500 13.000 1,500 The following data pertain to production policies and manufacturing specifications followed by Ponderosa: a. 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. b. The data on materials used are as follows: Direct Material Per-Linit Usage Unit Cost Part WK 298 Part #C30 Inventory policy dictates that suflicient 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. c. The direct labor used per unit of output is one and one-half hours. The average direct labor cost per hour is $20. d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.) Fixed Cost Variable Cast Component Component Supplies S1.00 0,20 1.10 Maintenance Supervision Depreciation Taxes Other 12 500 14.000 45.000 4,300 86,000 Chapter & Budgeting for Planning and Control e Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.) Fixed Costs Variable Costs Salaries S RR 500 Commissions S1.40 Depreciation 25,000 Shipping Other f. The unit selling price of the wiring harness assembly is $110. g. In February, the company plans to purchase land for future expansion. The land costs $68,000 h. All sales and purchases are for cash. The cash balance on January 1 equals S62,900. The firm wants to have an ending cash balance of at least $25,000. If a cash shortage develops, suflicient cash is borrowed to cover the shortage and provide the desired ending balance. Any cash borrowed must be borrowed in S1,000 increments and is repid 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: 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expense budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget 9. Budgeted income statement (ignore income taxes) 10. Cash budget

Answer 1

a. The desired ending inventory on schedule 2
Desired Ending Inventory for finished goods is 20% of next month's sales i.e. Desired Ending Inventory for
January = 20% of February Sales units i.e. 20% of 10500 = 2100 units
February = 20% of March Sales units i.e. 20% of 13000 = 2600 units
March = 20% of April Sales units i.e. 20% of 16000 = 3200 units

b. The desired ending inventory on schedule 3
Desired Ending Inventory for Material is 30% of next month's production needs, Desired Ending Inventory for
Part K29
January = 30% of February Production needs i.e. 30% of 22000 = 6600 units
February = 30% of March Production needs i.e. 30% of 27200 = 8160 units
March = 30% of April Production needs i.e. 30% of (16500 x 2) = 9900 units
* Production for April = 16000 (sales units) + (18500 x 20%) (Ending Inventory) - 3200 (Beginning Inventory) = 16500 units

Part C30
January = 30% of February Production needs i.e. 30% of 33000 = 9900 units
February = 30% of March Production needs i.e. 30% of 40800 = 12240 units
March = 30% of April Production needs i.e. 30% of (16500 x 3) = 14850 units
* Production for April = 16000 (sales units) + (18500 x 20%) (Ending Inventory) - 3200 (Beginning Inventory) = 16500 units

c. Variable overhead rate on schedule 5
Variable Overhead rate is per direct labor hour
= $1.00 (Supplies) + $0.20 (Power) + $1.10 (Maintenance) + $1.60 (Other) = $3.90 per direct labor hour

d. Variable overhead rate on schedule 6
Variable Overhead rate is per unit sold
= $1.40 (Commission) + $3.60 (Commission) + $1.60 (Other) = $6.60 per unit sold