In: Accounting
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 $60. Wesley expects the following unit sales:
January | 2,300 |
February | 2,600 |
March | 2,800 |
April | 2,900 |
May | 2,300 |
Wesley’s ending finished goods inventory policy is 35 percent of
the next month’s sales.
Suppose each handisaw takes approximately 0.35 hours to
manufacture, and Wesley pays an average labor wage of $15.50 per
hour.
Each handisaw requires a plastic housing that Wesley purchases from
a supplier at a cost of $6.00 each. The company has an ending
direct materials inventory policy of 10 percent of the following
month’s production requirements. Materials other than the housing
unit total $3.50 per handisaw.
Manufacturing overhead for this product includes $66,000 annual
fixed overhead (based on production of 27,000 units) and $1.00 per
unit variable manufacturing overhead. Wesley’s selling expenses are
6 percent of sales dollars, and administrative expenses are fixed
at $16,000 per month.
1. Compute the budgeted cost of goods sold for
the first quarter.
2. Compute the budgeted selling and administrative
expenses for the first quarter.
3. Complete the budgeted income statement for the
handisaw product for the first quarter