PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d] Wesley Power Tool
ID: 2508597 • Letter: P
Question
PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d] 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 $58. Wesley expects the following unit sales: January February March April May 5,000 5,200 5,700 5,500 4,900 Wesley's ending finished goods inventory policy is 25 percent of the next month's sales. Suppose each handisaw takes approximately .60 hours to manufacture, and Wesley pays an average labor wage of $20 per hour Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $8.00 each. The company has an ending raw materials inventory policy of 20 percent of the following month's production requirements. Materials other than the housing unit total $4.50 per handisaw Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley's selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month. Required: 1. Compute the following for the first quarter: (Do not round your intermediate calculations.) January February March 1st Quarter total 1. Budgeted Sales Revenue 2. Budgeted Production in Units 3. Budgeted Cost of Raw Material Purchases for the Plastic Housings 4. Budgeted Direct Labor CostExplanation / Answer
Answer
January
February
March
April
May
Budgeted Sale Units
5000
5200
5700
5500
4900
1. Budgeted sales Revenue @ $58 per unit
$ 2,90,000.00
$ 3,01,600.00
$ 3,30,600.00
$ 3,19,000.00
$ 2,84,200.00
January
February
March
April
May
Budgeted Sale Units
5000
5200
5700
5500
4900
Add: Expected Ending Inventory [25% of next month' sale]
1300
1425
1375
1225
0
Total Requirement
6300
6625
7075
6725
4900
Less; Beginning Inventory
not given
1300
1425
1375
1225
2. Budgeted Production in Units
6300
5325
5650
5350
3675
January
February
March
April
May
Budgeted Production FG
6300
5325
5650
5350
3675
Raw material required
6300
5325
5650
5350
3675
Add: Expected ending inventory 20% of next month
1065
1130
1070
735
0
Total requirement
7365
6455
6720
6085
3675
Less: Beginning inventory
0
1065
1130
1070
735
Plastic housing required
7365
5390
5590
5015
2940
3. Budgeted Cost of RM purchases for plastic housings @$8
$ 58,920.00
$ 43,120.00
$ 44,720.00
$ 40,120.00
$ 23,520.00
January
February
March
April
May
Budgeted Production FG
6300
5325
5650
5350
3675
Total labor hour required at 0.6 hoours
3780
3195
3390
3210
2205
4. Budgeted Direct labor cost @$20 per hour
$ 75,600.00
$ 63,900.00
$ 67,800.00
$ 64,200.00
$ 44,100.00
January
February
March
April
May
Budgeted Sale Units
5000
5200
5700
5500
4900
1. Budgeted sales Revenue @ $58 per unit
$ 2,90,000.00
$ 3,01,600.00
$ 3,30,600.00
$ 3,19,000.00
$ 2,84,200.00
January
February
March
April
May
Budgeted Sale Units
5000
5200
5700
5500
4900
Add: Expected Ending Inventory [25% of next month' sale]
1300
1425
1375
1225
0
Total Requirement
6300
6625
7075
6725
4900
Less; Beginning Inventory
not given
1300
1425
1375
1225
2. Budgeted Production in Units
6300
5325
5650
5350
3675
January
February
March
April
May
Budgeted Production FG
6300
5325
5650
5350
3675
Raw material required
6300
5325
5650
5350
3675
Add: Expected ending inventory 20% of next month
1065
1130
1070
735
0
Total requirement
7365
6455
6720
6085
3675
Less: Beginning inventory
0
1065
1130
1070
735
Plastic housing required
7365
5390
5590
5015
2940
3. Budgeted Cost of RM purchases for plastic housings @$8
$ 58,920.00
$ 43,120.00
$ 44,720.00
$ 40,120.00
$ 23,520.00
January
February
March
April
May
Budgeted Production FG
6300
5325
5650
5350
3675
Total labor hour required at 0.6 hoours
3780
3195
3390
3210
2205
4. Budgeted Direct labor cost @$20 per hour
$ 75,600.00
$ 63,900.00
$ 67,800.00
$ 64,200.00
$ 44,100.00
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