Wesley Power Tools manufactures a wide variety of tools and accessories. One of
ID: 2564131 • 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 $38. Wesley expects the following unit sales: January 3,000 February 3,200 March 3,700 April 3,500 May 2,900 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 $28 per hour. Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $5.00 each. The company has an ending raw materials inventory policy of 30 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. (all calculations for January through March) Calculate budgeted sales revenue calculate budgeted production in units calculate budgeted cost of materials budgeted cost of raw materials
Explanation / Answer
Wesley Power Tools Manufactures Sales Revenue Budget January February March April May (a) Budgeted Sales Units 3,000 3,200 3,700 3,500 2,900 (b) Sales price per unit $ 38 $ 38 $ 38 $ 38 $ 38 (a*b) Material needed for production $ 1,14,000 $ 1,21,600 $ 1,40,600 $ 1,33,000 $ 1,10,200 Wesley Power Tools Manufactures Production Budget January February March April May (a) Budgeted Sales Units 3,000 3,200 3,700 3,500 2,900 (c) (+) Ending inventory (30% of next month sales) 960 1,110 1,050 870 - (d) (-) Begning Inventory (30% of Current month sales) 900 960 1,110 1,050 870 (e = (a + c - d)) Budgeted Production 3,060 3,350 3,640 3,320 2,030 Wesley Power Tools Manufactures Cost of Direct Material Budget January February March April May (e) Budgeted Production 3,060 3,350 3,640 3,320 2,030 (f) Material requirement per unit 1 1 1 1 1 (g = (e * f)) Material needed for production 3,060 3,350 3,640 3,320 2,030 (h) Budgeted ending inventory (30% of next months production) 1,005 1,092 996 609 - () (i = g * h) Total material requirements 4,065 4,442 4,636 3,929 2,030 (j) Budgeted begning inventory 918 1,005 1,092 996 609 (k = i - j) Material to be purchased 3,147 3,437 3,544 2,933 1,421 (l) Cost of Raw Material cost per unit $ 5 $ 5 $ 5 $ 5 $ 5 (m = k * l) Total Cost of Raw Material cost $ 15,735 $ 17,185 $ 17,720 $ 14,665 $ 7,105 (n) Cost of Material cost per Unit $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 (o = k * n) Total Cost of Material cost $ 14,161.50 $ 15,466.50 $ 15,948.00 $ 13,198.50 $ 6,394.50 (p = l + n) Total Materials cost per Unit $ 9.50 $ 9.50 $ 9.50 $ 9.50 $ 9.50 (q = k * p) Total budgeted Direct Materials $ 29,896.50 $ 32,651.50 $ 33,668.00 $ 27,863.50 $ 13,499.50
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