Question

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: 1 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. Components 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.)

Answer 1

Answer is given below

Allison Manufacturing Sales Budget For the Quarter Ended March 31 January February March 40,000 50,000 60,000 $205 $205 $205 $8,200,000 $10,250,000 $12,300,000 Units Selling price Sales Total 150,000 $205 $30,750,000 Sales Desired Ending Inventory Total Needs Less: Beginning Inventory Units to be produced Allison Manufacturing Production Budget For the Quarter Ended March 31 January February 40,000 50,000 40,000 48,000 80,000 98,000 32,000 40,000 48,000 58,000 March 60,000 48,000 108,000 48.000 60,000 Total 150,000 48,000 198,000 32,000 166,000 April 60,000 49,600 109,600 48,000 61,600 Allison Manufacturing Direct Material Purchase Budget For the Quarter Ended March 31st January February February March March Metals Components Metals Components Metals Components 48,000 48,000 58,000 58,000 60,000 60,000 T otal Total Metals Components 166,000 166,000 10 10 Units to be produced Direct Material per unit Production Needs Desired ending inventory Total Needs Less: Beginning Inventory Direct Material to be purchased Cost per unit Total Cost 480,000 290,000 770,000 240,000 530,000 288,000 174,000 462,000 144,000 318,000 580,000 300,000 880,000 290,000 590,000 $81 $4,720,000 348,000 180.000 528,000 174,000 354,000 600,000 308,000 908,000 300,000 608,000 360,000 1,660,000 184,800 308,000 544,800 2,558,000 180,000 240,000 364,800 1,728,000 $5 $1,824,000 $13,824,000 996,000 184,800 1,534,800 144,000 1,036,800 $8 $5) $4,240,000 $1,590,000 $1,770,000 $4,864,000 $5,184,000 Allison Manufacturing Direct Labor Budget For the Quarter Ended March 31 January February 48,000 58,000 March 60,000 Total 166,000 Units to be produced Direct Labor time per unit Total hours needed Cost per hour Total Cost 144,000 $14.25 $2,052,000 174,000 180,000| $14.25 $14.25 $2,479,500 $2,565,000 498,000 $14.25 $7,096,500 Allison Manufacturing Overhead Budget For the Quarter Ended March 31 January February Budgeted Direct Labor hours 144,000 174,000 Variable Overhead rate $2.400 $2.40 Budgeted Variable Overhead $345,600 $417,600 Budgeted Fixed Overhead $338,000 $338,000 Total Overhead $683,600 $755,600 March 180,000 $2.40 $432,000 $338,000 $770,000 Total 498,000 $2.40 $1,195,200 $1,014,000 $2,209,200 Total 150,000 $3.60 $540,000 $3.600 Allison Manufacturing Selling and Administrative Expense Budget For the Quarter Ended March 31 January February March f. Planned Sales 40,000 50,000 60,000 Variable Sell and admn expense/unit $3.60 Total variable expense $144,000 $180,000 $216,000 Fixed Selling and admn expense Salaries $50,000 $50,000 $50,000 Depreciation $40,000 $40,000 $40,000 Other $20,000 $20,000 $20,000 Total Fixed expenses $110,000 $110,000 $110,000 $3.60 $150,000 $120,000 $60,000 $330,000 Total Selling and administration exp $254,000 $290,000 $326,000 $870,000 Allison Manufacturing Unit Cost Computation Direct Material Metal $80.00 Components $30.00 Direct Labor Overhead Variable Fixed Total Unit Cost Finished Good Inventory $110.00 $42.75 $7.20 $6.11 $166.06 7,970,805 Allison Manufacturing Cost of Goods Sold Budget For the Quarter Ended March 31st Direct Materials Metals $13,824,000 Components $5,184,000 Direct Labor Use Overhead Budgeted Manufacturing Cost Add: Beginning Finished Goods Cost of Goods available for sale Less: Ending Finished Goods Budgeted Cost of Goods Sold $19,008,000 $7,096,500 $2,209,200 $28,313,700 $5,313,920 $33,627,620 $7,970,805 $25,656,815 Allison Manufacturing Budgeted Income Statement For the Quarter Ended March 31 Sales Less: Cost of Goods Sold Gross Margin Less: Selling and administration expense Income before taxes $30,750,000 $25,656,815 $5,093,185 $870,000 $4,223,185 Allison Manufacturing Cash Budget For the Quarter Ended March 31st January February March $400,000 $50,000 $324,900 $8,200,000 $10,250,000 $12,300,000 $8,600,000 $10,300,000 $12,624,900 Total $400,000 $30,750,000 $31,150,000 Beginning Balance Cash Receipts Cash Available Less: Disbursements Purchase Direct Labor Overhead Selling and admn Total Tentative ending balance Borrowed/repaid Interest Ending Balance $5,830,000 $2,052,000 $683,600 $214,000 $8,779,6001 $179,600 $229,600 $6,490,000 $6,688,000 $2,479,500 $2,565,000 $755,600 $770,000 $250,000 $286,000 $9,975,100 $10,309,000 $324,900 $2,315,900 $229,600 $4,592 $324,900 $2,081,708 $19,008,000 $7,096,500 $2,209,200 $750,000 $29,063,700 $2,086,300 SO $4,592 $2,081,708 $50,000 Interest is computed for 2 months at 12%