ACT 538 Ponderosa, Inc., produces wiring harness assemblies used in

Ponderosa, Inc., produces wiring harness assemblies used inthe production of semi-trailer trucks. The wiring harnessassemblies are sold to various truck manufacturers around theworld. Projected sales in units for the coming five months aregiven below.The following data pertain to production policies andmanufacturing specifications followed by Ponderosa:1.Finished goods inventory on January 1 is 900 units. Thedesired ending inventory for each month is 20 percent of thenext month’s sales.2.The data on materials used are as follows:Inventory policy dictates that sufficient materials be on hand atthe beginning of the month to satisfy 30 percent of the nextmonth’s production needs. This is exactly the amount ofmaterial on hand on January 1.3.The direct labor used per unit of output is one and onehalf hours. The average direct labor cost per hour is $20.4.Overhead each month is estimated using a flexiblebudget formula. (Activity is measured in direct labor hours.)5.Monthly selling and administrative expenses are alsoestimated using a flexible budgeting formula. (Activity ismeasured in units sold.)6.The unit selling price of the wiring harness assembly is$110.7.In February, the company plans to purchase land forfuture expansion. The land costs $68,000.8.All sales and purchases are for cash. The cash balanceon January 1 equals $62,900. The firm wants to have an endingcash balance of at least $25,000. If a cash shortage develops,sufficient cash is borrowed to cover the shortage and providethe desired ending balance. Any cash borrowed must beborrowed in $1,000 increments and is repaid the followingmonth, as is the interest due. The interest rate is 12 percent perannum.Prepare a monthly operating budget for the first quarter withthe following schedules:1. Sales budget2. PRODUCTION BUDGET3.Direct materials purchase budget4. Direct Labor budget5. Overhead budget6. Selling and administrative expense budget7. ending finished goods inventory budget8. Costs of goods sold budget9. budgeted income statement10. Cash budget enter a negative balance as a negative amount