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 $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.)

	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 $0

Answer 1

	January	February	March	Quarter
Budgeted Sales Revenue	158400	167200	189200	514800
Budgeted Production units	3660	3950	4240	11850
Budgeted Cost of Raw Material Purchases for the Plastic Housings	42757	48530	48898	140185
budgeted labor cost	43920	47400	50880	142200

Working notes for the above answer is as under

1

1) Sales Budget
Particulars	January	February	March	Quarter
Units of Sales	3,600	3,800	4,300	11,700
Selling Price Per Unit	44	44	44	44
Total Budgeted Sales	158,400	167,200	189,200	514,800

2

2)Production Budget
Particulars	January	February	March	Quarter
Units Required to meet sales Budget	3,600	3,800	4,300	11,700
Add Desired Ending Inventory	1,140	1,290	1,230	3,660
Total Units required	4,740	5,090	5,530	15,360
Less beginning Inventory	(1,080)	(1,140)	(1,290)	(3,510)
Production required	3,660	3,950	4,240	11,850

                3

3)Direct Labor Budget
Particulars	January	February	March	Quarter
Production required	3,660	3,950	4,240	11,850
Direct labor required (Hours)	0.60	0.60	0.60	0.60
Total Hours required	2,196.00	2,370.00	2,544.00	7,110.00
Direct labor cost per hour	20	20	20	20
Total labor cost	43,920.00	47,400.00	50,880.00	142,200.00

4) Raw Material Budget
Particulars	January	February	March	Quarter
Production required	3,660	3,950	4,240	11,850
Add Desired Ending Inventory	790.00	1,060.00	860.00	2,710.00
Total Raw material available	4,450.00	5,010.00	5,100.00	14,560.00
Less beginning Inventory	(732.00)	(790.00)	(848.00)	(2,370.00)
raw material Purchased	3,718.00	4,220.00	4,252.00	12,190.00
Cost Per handishaw	11.50	11.50	11.50	11.50
Cost of Raw material budgeted	42,757.00	48,530.00	48,898.00	140,185.00