Question

Wesley Power tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless handisaw. Each handisaw sells for $60. Wesley expects the following unit sales:

January	2300
February	2,300
March	2,900
April	2700
May	2,300

Wesley’s ending finished goods inventory policy is 25 % of the next month’s sales.

Suppose each handisaw takes approximately 0.55 hours to manufacture, and Wesley pays an average labor wage of $13.50 per hour.

Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $5.00 each. The company has an ending direct materials inventory policy of 10% of the following month’s production requirements. Materials other than the housing unit total $4.00 per handisaw.

Manufacturing overhead for this product includes $63,000 annual fixed overhead (based on production of 24,0000 units) and $0.90 per unit variable manufacturing overhead Wesley’s selling expenses are 5% of sales dollars, and administrative expenses are fixed at $15,000 per month.

1. Compute the budgeted costs of goods sold for the quarter. (Round direct material, direct labor and overhead costs per unit to 2 decimal places. Round final answers to nearest dollar amount.)

	January	February	March	1st Quarter total
Budgeted cost of goods sold

2. Compute the budgeted selling and administrative expenses for the first quarter.

	January	February	March	1st Quarter Total
Budgeted selling and administrative expenses

3. Complete the budget income statement for the handisaw product for the first quarter. (round direct material, direct labor and overhead costs per unit to 2 decimal places. Round final answers to the nearest dollar amount.)

	January	Feburary	March	1st quarter total
Budgeted Sales Revenue
Budgeted Cost of Goods sold
Budget Gross Profit
Budgeted Selling And Administrative Expenses
Budgeted Net Operating Income.

Answer 1

Solution:

Computation of budgeted manufacturing cost per handishaw - Wesley Power Tool
Particulars	Per Unit
Direct Material ($5 + $4)	$9.00
Direct labor (0.55*$13.50)	$7.43
Variable manufacturing overhead	$0.90
Fixed manufacturing overhead ($63,000/24000)	$2.63
Budgeted manufacturing cost per unit	$19.95

Budgeted cost of goods sold - Wesley Power
Particulars	January	February	March	1st Quarter Total
Expected sales units	2300	2300	2900	7500
Manufacturing cost per unit	$19.96	$19.96	$19.96	$19.96
Budgeted cost of goods sold	$45,908.00	$45,908.00	$57,884.00	$149,700.00

Budgeted Selling and administrative expenses- Wesley Power
Particulars	January	February	March	1st Quarter Total
Expected sales unit	2300	2300	2900	7500
Selling price per unit	$60.00	$60.00	$60.00	$60.00
Budgeted sales	$138,000.00	$138,000.00	$174,000.00	$450,000.00
Selling expenses (5% of sales)	$6,900.00	$6,900.00	$8,700.00	$22,500.00
Administrative expenses	$15,000.00	$15,000.00	$15,000.00	$45,000.00
Budgeted Selling and administrative expenses	$21,900.00	$21,900.00	$23,700.00	$67,500.00

Budgeted Income Statement- Wesley Power
Particulars	January	February	March	1st Quarter Total
Budgeted sales	$138,000.00	$138,000.00	$174,000.00	$450,000.00
Budgeted cost of goods sold	$45,885.00	$45,885.00	$57,855.00	$149,625.00
Budgeted Gross profit	$92,115.00	$92,115.00	$116,145.00	$300,375.00
Selling expenses (5% of sales)	$6,900.00	$6,900.00	$8,700.00	$22,500.00
Administrative expenses	$15,000.00	$15,000.00	$15,000.00	$45,000.00
Budgeted net operating income	$70,215.00	$70,215.00	$92,445.00	$232,875.00