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 $70. Wesley expects the following unit sales:

January	2,400
February	2,200
March	2,900
April	2,600
May	2,000

Wesley’s ending finished goods inventory policy is 35 percent of the next month’s sales.
      Suppose each handisaw takes approximately .45 hours to manufacture, and Wesley pays an average labor wage of $16.50 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 10 percent of the following month’s production requirements. Materials other than the housing unit total $4.00 per handisaw.
      Manufacturing overhead for this product includes $66,000 annual fixed overhead (based on production of 24,000 units) and $.80 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $16,000 per month.

Required:
2. Compute the budgeted selling and administrative expenses.

	January February March 1st Quarter Total Budgeted Selling and Administrative Expenses $0

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 decimal places. Round final answers to the nearest dollar

	WESLEY POWER TOOLS Budgeted Income Statement For the Quarter Ending March January February March 1st Quarter Total Budgeted Gross Profit $0 Budgeted Net Operating Income $0

amount.)

Answer 1

Solution 2:

Budgeted Selling and administrative expenses- Wesley Power
Particulars	January	February	March	1st Quarter Total
Expected sales unit	2400	2200	2900	7500
Selling price per unit	$70.00	$70.00	$70.00	$70.00
Budgeted sales	$168,000.00	$154,000.00	$203,000.00	$525,000.00
Selling expenses (7% of sales)	$11,760.00	$10,780.00	$14,210.00	$36,750.00
Administrative expenses	$16,000.00	$16,000.00	$16,000.00	$48,000.00
Budgeted Selling and administrative expenses	$27,760.00	$26,780.00	$30,210.00	$84,750.00

Solution 3:

Computation of budgeted manufacturing cost per handishaw - Wesley Power Tool
Particulars	Per Unit
Direct Material ($7 + $4)	$11.00
Direct labor (0.45*$16)	$7.20
Variable manufacturing overhead	$0.80
Fixed manufacturing overhead ($66,000/24000)	$2.75
Budgeted manufacturing cost per unit	$21.75

Budgeted cost of goods sold - Wesley Power
Particulars	January	February	March	1st Quarter Total
Expected sales units	2400	2200	2900	7500
Manufacturing cost per unit	$21.75	$21.75	$21.75	$21.75
Budgeted cost of goods sold	$52,200.00	$47,850.00	$63,075.00	$163,125.00

Budgeted Income Statement- Wesley Power
Particulars	January	February	March	1st Quarter Total
Budgeted sales	$168,000.00	$154,000.00	$203,000.00	$525,000.00
Budgeted cost of goods sold	$52,200.00	$47,850.00	$63,075.00	$163,125.00
Budgeted Gross profit	$115,800.00	$106,150.00	$139,925.00	$361,875.00
Selling expenses (7% of sales)	$11,760.00	$10,780.00	$14,210.00	$36,750.00
Administrative expenses	$16,000.00	$16,000.00	$16,000.00	$48,000.00
Budgeted net operating income	$88,040.00	$79,370.00	$109,715.00	$277,125.00