PA8-5 Preparing Operating Budget Components [LO 8-3f, g, h] Wesley Power Tools m

Question

PA8-5 Preparing Operating Budget Components [LO 8-3f, g, h] Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $70. Wesley expects the following unit sales: January February March Aoril May 2,000 2,400 2,800 2,500 2,000 Wesley's ending finished goods inventory policy is 25 percent of the next month's sales. Suppose each handisaw takes approximately .35 hours to manufacture, and Wesley pays an average labor wage of $14.50 per hour Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $6.00 each. The company has an ending raw materials inventory policy of 10 percent of the following month's production requirements Materials other than the housing unit total $4.00 per handisaww. Manufacturing overhead for this product includes S69,000 annual fixed overhead (based on production of 21,000 units) and $.70 per unit variable manufacturing overhead. Wesley's selling expenses are 6 percent of sales dollars, and administrative expenses are fixed at $14,000 per month Required: 1. Compute the budgeted cost of goods sold for the first quarter. (Round direct material, diroct labor and ovorhoad costs por unit to 2 docimal places. Round final answors to the nearest dollar amount) st Budgeted Cost of Goods Sold 2. Compute the budgeted selling and administrative expenses. st Budgeted Selling and Administratve Expenses

Explanation / Answer

Direct material 10 Direct labor 5.08 (14.50*.35) Manufacturing overheads 3.99 (69000/21000+.70) Total cost per unit 19.07 Particulars January February March Cost per unit 19.07 19.07 19.07 Units 2000 2400 2800 Cost of goods sold 38140 45768 53396 Particulars January February March Sales dollars 140000 168000 196000 Percentage of sales dollars 6% 6% 6% Selling expense 8400 10080 11760 Administrative expense 14000 14000 14000 Budgeted selling and administrative expense 22400 24080 25760

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