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 22330 $0 4. Budgeted Direct Labor Cost $55,380 $60,450 $67,470 $183,300

Answer 1

SALES BUDGET
			JAN	FEB	MARCH	QUARTER	APRIL	MAY
Budgeted Sales units			2,800	3,000	3,500	9,300	3,300	2,700
Selling price per unit			36	36	36	36	36	36
Total Sales			100,800	108,000	126,000	334,800	118,800	97,200
PRODUCTION BUDGET
			JAN	FEB	MARCH	QUARTER	APRIL
Budgeted Sales Units			2,800	3,000	3,500	9,300	3,300
Add: Desired Ending Finished inventory			600	700	660	660	540
Total Needs			3,400	3,700	4,160	9,960	3,840
Less: Beginning Finished Inventory			560	600	700	560	660
Required Production in units			2,840	3,100	3,460	9,400	3,180
RAW MATERIAL PURCHASE BUDGET
			APRIL	MAY	JUNE	QUARTER	JULY
Budgeted production units			2,840	3,100	3,460	9,400	3,180
Raw material required per unit			1	1	1	1	1
Total Production needs			2,840	3,100	3,460	9,400	3,180
Add: Desired Ending Inventory			775	865	795	795
Total needs			3,615	3,965	4,255	10,195
Less: Beginning Inventory			710	775	865	710
Purchase Units			2,905	3,190	3,390	9,485
Cost price per unit			7.00	4.00	4.00	4.00
Budgeted Purchase in $			20,335	12,760	13,560	37,940
LABOUR COST BUDGETS
			JAN	FEB	MARCH	QUARTER
Units to be produced			2,840	3,100	3,460	9,400
Labour required per unit			0.75	0.75	0.75	0.75
Labour hours			2130	2325	2595	7050
Labuor Rate per hour			26	26	26	26
Budgeted Labour cost in $			55,380	60,450	67,470	183,300
			JAN	FEB	MARCH	TOTAL
Budgeted sales			100800	108000	126000	334800
Budgeted production units			2840	3100	3460	9400
Raw material purchase in $			20335	12760	13560	37940
labour cost in $			55380	60450	67470	183300