Question

PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d] Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handsaw. Each handsaw sells for $36 Wesley expects the following unit sales: 2 800 3.000 January February March Agri 3.300 2700 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 $25 per hour Each handsaw requires a plastic housing that Wesley purchases from a supplier at a cost of $700 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 handise 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. 2. 3. 4. Budgeted Sales Revenue Budgeted Production in Units Budgeted cost of Raw Material Purchases for the Plastic Housings Budgeted Direct Labor Cost

Answer 1

1. All the above required values are computed as per the attached image.
2. For production and raw material purchases the logic is that, certain percentage of next month requirement is done in the current month, which means that current months requirements will also be done in the previous month. Using this logic calculations have been done.
3. Formulas for calculation are mentioned in the image itself and every amount calculation is not done because it may be a confusion for eyesight. So inorder to be clear formulas are mentioned in the particulars itself.

Particulars January February March Total +00,800 IOS.co0 126,000 334, 800 Doudgeted sales revenue A Condgeted wit sales & $36] 3 Budgeted Production in with o cuorent month sales with b Next moth sales X20% 3,500 9,300 3,000 1,960 600 660 700 Caco) (ooo) (560) (860) Covet moth sales x 20%. 3100 3340 3460 9,400 Production (a+b-c) 94,500 65,100 1,000 5,775 6, 125 Budgeted cost y yow material purchases for plastic housings. a currat north requirement & $7 b) Next month requirement x $7*25% Current month requirement & $7x25%. Cost Catb.c) 19,600 5,950 C4,900 19950 6,125) (5.250) 21,875 7,150 (16.075) 65,975 24,150 60,450 67,470 183,300 55,380 cost direct labour Budgered (production (about) x $26 x 0.75 hours)