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 $54. Wesley expects the following unit sales: January 4,600 February 4,800 March 5,300 April 5,100 May 4,500 Wesley’s ending finished goods inventory policy is 20 percent of the next month’s sales. Suppose each handisaw takes approximately .75 hours to manufacture, and Wesley pays an average labor wage of $30 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 25 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.)

question demand:

compute the following for the first quarter: for janurary feburary and march

1. Budgeted sales revenue

2.Budgeted production in units

3.Budgeted cost of raw material purchases for the plastic housings

4.Budgeted direct labor cost

Answer 1

Ans-1-Budgeted Sales Revenue

	January	February	March	1st Quarter
Sales units	4,600	4,800	5,300	14,700
Selling price	$54	$54	$54	$54
Sales revenue (Sales units*sales price)	$248,400	$259,200	$286,200	$793,800

Ans-2- Budgeted production in units:-

	January	February	March	1st Quater
Sales units	4,600	4,800	5,300	14,700
Ending Inventory	960	1,060	1,020	1,020
Beginning inventory	920	960	1,060	920
Production (Sales units +ending inventory-beginning inventory)	4,640	4,900	5,260	14,800

Working Note:-

1-Computation of ending inventory:-

According to the company's policy ending inventory is 20% of the next month's sales-

	January	February	March	April	May
Sales units	4,600	4,800	5,300	5,100	4,500
Ending Inventory	960 (4,800*20/100)	1,060 (5,300*20/100)	1,020 (5,100*20/100)	900 (4.500*20/100)	-

2-Beginning Inventory of january is 20% of 4,600 january sales units.It is assumed that the closing inventory of december (which will be 20% of 4,600 january sales units =920) will be consider as january opening inventory.

Ans-3-Budgeted cost of raw material purchases for the plastic housings:-

	January	February	March	1st Quarter
Production	4,640	4,900	5,260	14,800
Ending inventory	1,225	1,315	1,245	1,245
Beginning inventory	1,160 (4,640*25%)	1,225	1,315	1,160
Purchases (Production +ending inventory-beginning inventory)	4,705	4,990	5,190	14,885
Price per unit	$5	$5	$5	$5
Total Cost (Purchases * price per unit)	$23,525	$24,950	$25,950	$74,425

Working Note-

1-Ending inventory of raw materials is 25% of the following month's production requirements:

	January	February	March	April
Production	4,640	4,900	5,260	4,980 (5,100+900-1,020)
Ending raw material inventory	1,225 (4,900*25/100)	1,315 (5,260*25/100)	1,245 (4,980*25/100)

Ans-4- Budgeted direct labor cost:-

	January	February	March	1st Quarter
Production	4,640	4,900	5,260	14,800
Hours per unit	0.75	0.75	0.75	0.75
Total Hours (Production * Hours per unit)	3,480	3,675	3,945	11,100
Cost per hour	$30	$30	$30	$30
Total cost(Total hours* Cost per hour)	104,400	110.250	118,350	333,000

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