Wesley Power Tools manufactures a wide variety of tools and accessories. One of
ID: 2552651 • Letter: W
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 $44. Wesley expects the following unit sales:
Wesley’s ending finished goods inventory policy is 30 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 $7.00 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.)
Explanation / Answer
Answer:
January
February
March
Quarter
Budgeted Sales Revenue
158400
167200
189200
514800
Budgeted Production units
3660
3950
4240
11850
Budgeted Cost of Raw Material
Purchases for the Plastic Housings
42757
48530
48898
140185
budgeted labor cost
43920
47400
50880
142200
Working notes for the above answer is as under
1
1) Sales Budget
Particulars
January
February
March
Quarter
Units of Sales
3,600
3,800
4,300
11,700
Selling Price Per Unit
44
44
44
44
Total Budgeted Sales
158,400
167,200
189,200
514,800
2
2)Production Budget
Particulars
January
February
March
Quarter
Units Required to meet sales Budget
3,600
3,800
4,300
11,700
Add Desired Ending Inventory
1,140
1,290
1,230
3,660
Total Units required
4,740
5,090
5,530
15,360
Less beginning Inventory
(1,080)
(1,140)
(1,290)
(3,510)
Production required
3,660
3,950
4,240
11,850
3
3)Direct Labor Budget
Particulars
January
February
March
Quarter
Production required
3,660
3,950
4,240
11,850
Direct labor required (Hours)
0.60
0.60
0.60
0.60
Total Hours required
2,196.00
2,370.00
2,544.00
7,110.00
Direct labor cost per hour
20
20
20
20
Total labor cost
43,920.00
47,400.00
50,880.00
142,200.00
4) Raw Material Budget
Particulars
January
February
March
Quarter
Production required
3,660
3,950
4,240
11,850
Add Desired Ending Inventory
790.00
1,060.00
860.00
2,710.00
Total Raw material available
4,450.00
5,010.00
5,100.00
14,560.00
Less beginning Inventory
(732.00)
(790.00)
(848.00)
(2,370.00)
raw material Purchased
3,718.00
4,220.00
4,252.00
12,190.00
Cost Per handishaw
11.50
11.50
11.50
11.50
Cost of Raw material budgeted
42,757.00
48,530.00
48,898.00
140,185.00
January
February
March
Quarter
Budgeted Sales Revenue
158400
167200
189200
514800
Budgeted Production units
3660
3950
4240
11850
Budgeted Cost of Raw Material
Purchases for the Plastic Housings
42757
48530
48898
140185
budgeted labor cost
43920
47400
50880
142200
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