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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 32
OPERATING BUDGET, COMPREHENSIVE ANALYSIS
Cartwright, Inc., produces wiring harness assemblies used in the production of semitrailer trucks. The wiring harness assemblies are sold to various truck manufacturers around the world. Projected sales in units for the coming four months are given below.
The following data pertain to production policies and manufacturing specifications followed by Cartwright:
a. Finished goods inventory on January 1 is 13,000 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:
Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satisfy 50 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 $15.
d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)
e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)
f. The unit selling price of the wiring harness assembly is $85.
g. In February, the company plans to purchase land for future expansion. The land costs $237,500.
h. All sales and purchases are for cash. The cash balance on January 1 equals $62,900. 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 one month later, 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
Cartwright, Inc., produces wiring harness assemblies used in the production of semitrailer trucks. The wiring harness assemblies are sold to various truck manufacturers around the world. Projected sales in units for the coming four months are given below.
The following data pertain to production policies and manufacturing specifications followed by Cartwright:
a. Finished goods inventory on January 1 is 13,000 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:
Inventory policy dictates that sufficient materials be on hand at the beginning of the month to satisfy 50 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 $15.
d. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)
e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)
f. The unit selling price of the wiring harness assembly is $85.
g. In February, the company plans to purchase land for future expansion. The land costs $237,500.
h. All sales and purchases are for cash. The cash balance on January 1 equals $62,900. 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 one month later, 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
Explanation
Verified
Verified
1.
Prepare the sales budget:
2.
Prep...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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