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 handisaw. Each handisaw sells for $58. Wesley expects the following unit sales: 5,000 5.200 5,700 5,500 4,900 January February March April May Wesley's ending finished goods inventory policy is 25 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 $8.00 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 $18,000 per month Required: 1. Compute the following for the first quarter: (Do not round your intermediate calculations.) January February March 1st Quarter total 330,600$ 290,000 $ Budgeted Sales Revenue 1 301,600 922 200 2. Budgeted Production in Units 5,325 43,120 $ 5,650 10,975 Budgeted Cost of Raw Material Purchases for the Plastic Housings 3. 44,720 $ 87,840 63,900 $ Budgeted Direct Labor Cost 4. 67,800 131,700

Answer 1

Solution:

Budgeted Sales Revenue - Wesley Power January February 5000 5200 $58.00 $58.00 | $290,000 $301,600 Particulars Expected sales units Selling price per unit Budgeted Sales Revenue -7R March 1st Quarter Total 5700 15900 $58.00 $58.00 $330,600 $922,200 6 7 12 Production Budget in Units - Wesley Power Tool Particulars | January Feburary Expected sales units 5000 5200 Add: ending inventory (25% of next month sales) 1300 1425 Less: Beginning inventory 1250 1300 March 1st Quarter Total 5700 15900 1375 1375 1425 1250 15 Estimated production in units 5050 5325 5650 16025 Budgeted Cost of raw material purchases of Plastic Housings - Wesley Power Tool Particulars January Feburary March 1st Quarter Total Budgeted Production units 5050 5325 5650 16025 Plastic housing per unit 11 Estimated consumption of Plastic Housings 5050 5325 5650 16025 Add: ending inventory (25% of next month's need 1065 1130 1070 1070 Less: Beginning inventory 1010 1065 1130 10101 Budgeted purchase units of Plastic housing Cost per unit of Plastic housing 5105 $8.00 53901 $8.00 5590 $8.00 16085 $8.00 31 Budgeted cost of raw material purchases $40,840.00 $43,120.00 $44,720.00 $128,680.00 33 34 35 Budgeted Direct labor cost - Wesely Power Tool Particulars January Feburary Budgeted Production units 5050 5325 Direct labor hours per unit 0.60 0.60 601 Budgeted direct labor hours 3030 3195 direct labor cost per hour $20.00 $20.00 March 1st Quarter Total 5650 16025 0.60 0.60 3390 9615 $20.00 $20.00 37 40 Budgeted direct labor cost $60,600.00 $63,900.00 $67,800.00 $192,300.00 46 54 3) Sheet230 (8) Sheet599 Sheet603 Sheet604 She