Question

In: Accounting

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular...

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 $36. Wesley expects the following unit sales:

January 2,800
February 3,000
March 3,500
April 3,300
May 2,700


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 $26 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 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.)

January February March 1st Quarter total
1. Budgeted Sales Revenue $0
2. Budgeted Production in Units 0
3. Budgeted Cost of Raw Material Purchases for the Plastic Housings $0
4. Budgeted Direct Labor Cost

Solutions

Expert Solution

Solution 1:
Budgeted Sales Revenue - Wesley Power
Particulars January February March 1st Quarter Total
Expected sales units 2800 3000 3500 9300
Selling price per unit $36.00 $36.00 $36.00 $36.00
Budgeted Sales Revenue $100,800.00 $108,000.00 $126,000.00 $334,800.00
Solution 2:
Production Budget in Units - Wesley Power Tools
For First quarter
Particulars January Feburary March 1st Quarter Total April
Sales 2800 3000 3500 9300 3300
Desired ending inventory (20% of next month sales) 600 700 660 660 540
Total needs 3400 3700 4160 9960 3840
Less: Beginning inventory 560 600 700 560 660
Units produced 2840 3100 3460 9400 3180
Solution 3:
Direct material purchase budget (Plastic housing) -Wesley Power Tools
Particulars January Feburary March 1st Quarter Total
Budgeted Production units 2840 3100 3460 9400
Direct material per unit 1 1 1 1
Production needs 2840 3100 3460 9400
Desired ending inventory (25% of following month production requirements) 775 865 795 795
Total needs 3615 3965 4255 10195
Less: Beginning inventory 710 775 865 710
Direct materials to be purchased (Plastic housing) 2905 3190 3390 9485
Cost per plastic housing $7.00 $7.00 $7.00 $7.00
Budgeted cost of purchases $20,335.00 $22,330.00 $23,730.00 $66,395.00
Solution 4:
Budgeted labor cost budget - Wesely Power Tool
Particulars January Feburary March 1st Quarter Total
Budgeted Production units 2840 3100 3460 9400
Direct labor hours per unit 0.75 0.75 0.75 0.75
Budgeted direct labor hours 2130 2325 2595 7050
direct labor cost per hour $26.00 $26.00 $26.00 $26.00
Budgeted direct labor cost $55,380.00 $60,450.00 $67,470.00 $183,300.00

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