In: Accounting
PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d]
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 $44. Wesley expects the following unit sales:
January | 3,600 |
February | 3,800 |
March | 4,300 |
April | 4,100 |
May | 3,500 |
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 $20 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.
Required:
1. Compute the following for the first quarter:
(Do not round your intermediate calculations.)
FIND FOR JANUARY, FEBRUARY, MARCH and First quarter total
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