Wesley Power Tools manufactures a wide variety of tools and accessories. One of

Question

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 $50. Wesley expects the following unit sales:

January 2,400
February 2,500
March 2,900
April 2,800
May 2,100

Wesley’s ending finished goods inventory policy is 25 percent of the next month’s sales.
      Suppose each handisaw takes approximately .25 hours to manufacture, and Wesley pays an average labor wage of $12.50 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 $3.50 per handisaw.
      Manufacturing overhead for this product includes $66,000 annual fixed overhead (based on production of 24,000 units) and $.80 per unit variable manufacturing overhead. Wesley’s selling expenses are 6 percent of sales dollars, and administrative expenses are fixed at $16,000 per month.

Required:
1. Compute the budgeted cost of goods sold for the first quarter. (Round direct material, direct labor and overhead costs per unit to 2 decimal places. Round final answers to the nearest dollar amount.)

       

2. Compute the budgeted selling and administrative expenses.

(Please explain steps)

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 $50. Wesley expects the following unit sales: January February March April 2,400 2 500 2,900 2,800 2,100 ay Wesley's ending finished goods inventory policy is 25 percent of the next month's sales. Suppose each handisaw takes approximately 25 hours to manufacture, and Wesley pays an average labor wage of $12.50 per hour. Each handisaw requires a plastic housing that Wesley purchases from a suppller 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 $3.50 per handisaw Manufacturing overhead for this product includes $66,000 annual fixed overhead (based on production of 24,000 units) and $.80 per unit variable manufacturing overhead. Wesley's selling expenses are 6 percent of sales dollars, and administrative expenses are fixed at $16,000 per month. Required: 1. Compute the budgeted cost of goods sold for the first quarter. (Round direct material, direct labor and overhead costs per unit to 2 decimal places. Round final answers to the nearest dollar amount.) JanuaryFebruany March 1t Quarter Total Budgeted Cost of Goods Sold 2. Compute the budgete d selling and administrative expenses. January February March 1st Quarter Total Budgeted Selling and Administrative Expenses

Explanation / Answer

1) For cost of goods sold, we first formulate the planned production units for each month

Now, we create the cost of goods sold budget

2) Budgeted selling and admin expenses

Jan Feb Mar Total Sales units 2400 2500 2900 7800 Ending units 625 725 700 2050 Beginning units 625 725 1350 Planned production 3025 2600 2875 8500

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