Wesley Power Tools manufactures a wide variety of tools and accessories. One of
ID: 2565033 • 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 $50. Wesley expects the following unit sales: January 4,200 February 4,400 March 4,900 April 4,700 May 4,100 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 $26 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 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.1. Compute the following for the first quarter: Budget Revenue, Budgeted production in units, Budgeted cost of raw material purchases for the plastic housings, and budgeted direct labor cost.
Explanation / Answer
Wesley Power Tools Manufactures Sales Revenue Budget January February March April May (a) Budgeted Sales Units 4,200 4,400 4,900 4,700 4,100 (b) Sales price per unit $ 50 $ 50 $ 50 $ 50 $ 50 (a*b) Material needed for production $ 2,10,000 $ 2,20,000 $ 2,45,000 $ 2,35,000 $ 2,05,000 Wesley Power Tools Manufactures Production Budget January February March April May (a) Budgeted Sales Units 4,200 4,400 4,900 4,700 4,100 (c) (+) Ending inventory (30% of next month sales) 1,320 1,470 1,410 1,230 - (d) (-) Begning Inventory (30% of Current month sales) 1,260 1,320 1,470 1,410 1,230 (e = (a + c - d)) Budgeted Production 4,260 4,550 4,840 4,520 2,870 Wesley Power Tools Manufactures Cost of Direct Material Budget (Plastic Housing) January February March April May (e) Budgeted Production 4,260 4,550 4,840 4,520 2,870 (f) Material requirement per unit 1 1 1 1 1 (g = (e * f)) Material needed for production 4,260 4,550 4,840 4,520 2,870 (h) Budgeted ending inventory (30% of next months production) 1,365 1,452 1,356 861 - (i = g * h) Total material requirements 5,625 6,002 6,196 5,381 2,870 (j) Budgeted begning inventory 1,278 1,365 1,452 1,356 861 (k = i - j) Material to be purchased 4,347 4,637 4,744 4,025 2,009 (l) Cost of Raw Material cost per unit $ 8 $ 8 $ 8 $ 8 $ 8 (m = k * l) Total Cost of Raw Material cost $ 34,776 $ 37,096 $ 37,952 $ 32,200 $ 16,072 Total budgeted Direct Material (plastic housing) $ 34,776.00 $ 37,096.00 $ 37,952.00 $ 32,200.00 $ 16,072.00 Wesley Power Tools Manufactures Cost of Direct Labor Budget January February March April May (e) Budgeted Production 4,260 4,550 4,840 4,520 2,870 (n) DL hours per hour 0.60 0.60 0.60 0.60 0.60 (o = e * n) Total direct labour hours needed 2,556 2,730 2,904 2,712 1,722 (p) Direct labour rate per hour $ 26 $ 26 $ 26 $ 26 $ 26 (q = o * p) Total budgeted direct labour hour $ 66,456.00 $ 70,980.00 $ 75,504.00 $ 70,512.00 $ 44,772.00
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