Wiley’s electronics has a policy of maintaining a finished goods inventory balance at the end of...

Wiley’s electronics has a policy of maintaining a finished goods inventory balance at the end of a month equal to 30% of the budgeted sales requirements of the following month. The ending inventory balance on 30 January was 840 units, and the projected unit sales for February, March, and April were 4,800, 5,200, and 5,400 units respectively. The labor requirements per unit produced are as follows:

Particulars	Time required (hours)	Rate per hour
Machining	1.8	$23
Sorting	0.9	$18
Assembly	2.2	$22

Prepare a production budget for February and March.
Prepare a direct labor budget for February and March.

Please do not copy from Chegg. Only attempt if you are sure about the answer. Solve in a step by step manner, explaining each step.

Expert Solution

The Ending Inventory balance as on 30 January	840	Units
Ending Inventory policy of Wiley's electronic :
	= 30 % of Budgeted sale of following month
Projected Sales :
	February			4800	Units
	March			5200	Units
	April			5400	Units

Labour requirement per unit produced :
			Time Required	Rate per hour
		Machining	1.8	$ 23.00
		Sorting	0.9	$ 18.00
		Assembly	2.2	$ 22.00

a) Production Budget :				in Units
		January	February	March	April
Opening Inventory	0	840	1560
Sales			4800	5200	5400
Closing Inventory (Note-1)	840	1560	1620
Production (Note-2)		5520	5260

Note-1 : February = 30 % of March Sale = 5200 x 30% = 1560 units
March = 30 % of April Sale = 5400 x 30% = 1620 units
Note-2 : February = Sale+Closing inventory-Opeing inventory
	= 4800+1560-840 = 5520 units
March = Sale+Closing inventory-Opeing inventory
	= 5200+1620-1560 = 5260 units

b) Direct labor Budget :
		Time Required (Hour)	Rate per hour	February	March
Production (Units)				5520	5260

Process :-	Machining	1.8	$ 23.00	$ 2,28,528	$ 2,17,764
(Note-3)	Sorting	0.9	$ 18.00	$ 89,424	$ 85,212
	Assembly	2.2	$ 22.00	$ 2,67,168	$ 2,54,584
	Total			$ 5,85,120	$ 5,57,560

Note-3 : Labour cost of each month = Production x time required x rate per hour

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