PA85 Preparing Operating Budget Components [LO 8-3f, g, h] Wcscy Power Tools man

Question

PA85 Preparing Operating Budget Components [LO 8-3f, g, h] Wcscy Power Tools manutacturcs a widc varicty ot tools and accossorics. One ot its more pcpular itcms is a cordless power handisaw Each handsaw sells 1or 550. Woslcy cxpoects the olloing unit salcs January February March Aprl May 2 500 2300 Wesley's ending firnished goods inverntory policy is 40 percent of the next monthi's sales Suppose each handisaw takes approximately 45 hours to mariufacture, and Wesley pays an average labor wage of S15.50 per hour Each handisaw requires a plastic housing that Wesley purcharses from a supplier at a cost of $5.00 each. The company has an ending raw materials inventory policy of 10 percent of thefolowing mornth's production requirements. Materials other than the housing unit total 31.50 per handisaw Manufacturing overhead for this product includes $,000 annual fixed overhead (based on production of 21,000 units) end $1.10 per unit variable manufacturing overhead. Wesley's selligexnses are 5 percent of sales dollars, and administrative expenses are fixed at $17,000 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 aciministrative expenses 3. Complete the budgeted income statement for the handisaw product for the first quarter (Round direct material, direct labor and overhead costs per unit to 2 declmal places. Round final answers to the nearest dollar amount.)

Explanation / Answer

Sales Budget Month January February March April Projected Sales 2200 2500 3200 2900 Finished Goods (40% of following month sale) 1000 1280 1160 Production Budget Month January February March Opening Stock 0 1000 1280 Sales 2200 2500 3200 Closing Stock 1000 1280 1160 Production (Closing Stock +sales - opening stock) 3200 2780 3080 Labour costs January February March No of hours required (a) =45/60 0.75 0.75 0.75 Production units (b) 3200 2780 3080 Production hours (A*B) 2400 2085 2310 Fixed overheads per unit (66000/21000) 3.142857 Budget for First Quarter Months January February March Sales (Units) 2200 2500 3200 Sale price per unit 50 50 50 Sales in $ (Units *price per unit) 110000 125000 160000 Costs: Raw Materials cost (Production units *5) 16000 13900 15400 Raw materials other than housing (Production units *1.5) 4800 4170 4620 Labour costs (Production hours*15.5) 37200 32317.5 35805 Fixed overheads (Production units*3.14) 10048 8729.2 9671.2 Variable overheads(Production units *1.1) 3520 3058 3388 Selling expenses (Sales *5%) 5500 6250 8000 Administrative expenses 17000 17000 17000 Budgeted Costs 94068 85424.7 93884.2

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