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 $68. Wesley expects the following unit sales: January 6,000 February 6,200 March 6,700 April 6,500 May 5,900 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 $30 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 20 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.

Answer 1

Production Budget (Finished goods)		Jan	Feb	March	April	May
Sales Unit	A	6000.00	6200	6700	6500	5900
Add: Ending Inventory 30% of next month sale	B	1860.00	2010.00	1950.00	1770.00
Required Unit of available production	A+B	7860	8210	8650	8270
Less: Opening Inventory		1800.00	1860.00	2010.00	1950.00
Required Production (Unit)		6060.00	6350.00	6640.00	6320.00
*opening enventory of the Jan will ne 30% of Jan sale
Production Budget (Raw Material)		Jan	Feb	March	April	May
Production Units	A	6060.00	6350.00	6640.00	6320.00
Add: Ending Raw material 20% of Following month production requirement	B	1270.00	1328.00	1264.00	0.00
Required Unit of available production	A+B	7330	7678	7904	6320
Less: Opening Inventory		1212.00	1270.00	1328.00	1264.00
Required Raw material Qty		6118.00	6408.00	6576.00	5056.00
*Opening enventory will be 20% of current month production, Previous month closing will be current month opening)
Labour wages Budget		Jan	Feb	March	April	May
Hour to manufacture (0.60 hour @30per hour) * Required production		109080	114300	119520	113760
Plastic Housing Budget		Jan	Feb	March	April	May
(Required production * 7 )		42420	44450	46480	44240

Statement	Jan	Feb	March	Total
Sales (68 * Sales Unit)	408000	4216000	455600	5079600
Less:
Labour	109080	114300	119520	342900
Plastic Housing	42420	44450	46480	133350
Material @ 4.5	27531	28836	29592	85959
Manufacturing Overhead (72000/12)*	6000	6000	6000	18000
Variable overhead (Required production *1.20)	7272	7620	7968	22860
Selling Expense @7% of sales	28560	295120	31892	355572
Administrative expense	18000	18000	18000	54000
Total Expense	238863	514326	259452	1012641
Balance	169137	3701674	196148	4066959
*Fixed overhead is allocated equally