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 $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

	January February March 1st Quarter total 1. Budgeted Sales Revenue $100,800 $108,000 $126,000 $334,800 2. Budgeted Production in Units 2,840 3,100 3,460 9,400 3. Budgeted Cost of Raw Material Purchases for the Plastic Housings $0 4. Budgeted Direct Labor Cost $55,380 $60,450 $67,470 $183,300

Answer 1

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	$1,00,800	$1,08,000	$1,26,000	$3,34,800

Solution 2:

Production Budget in Units - Wesley Power Tool
Particulars	January	Feburary	March	1st Quarter Total	April
Expected sales units	2800	3000	3500	9300	3300
Add: ending inventory (20% of next month sales)	600	700	660	660	540
Less: Beginning inventory	560	600	700	560	660
Estimated production in units	2840	3100	3460	9400	3180

Solution 3:

Budgeted Cost of raw material purchases of Plastic Housings - Wesley Power Tool
Particulars	January	Feburary	March	1st Quarter Total
Budgeted Production units	2840	3100	3460	9400
Plastic housing per unit	1	1	1	1
Estimated consumption of Plastic Housings	2840	3100	3460	9400
Add: ending inventory (25% of next month's needs)	775	865	795	795
Less: Beginning inventory	710	775	865	710
Budgeted purchase units of Plastic housing	2905	3190	3390	9485
Cost per unit of Plastic housing	$7.00	$7.00	$7.00	$7.00
Budgeted cost of raw material purchases	$20,335	$22,330	$23,730	$66,395

Solution 4:

Budgeted Direct labor cost - 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	$60,450	$67,470	$1,83,300