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 $38. Wesley expects the following unit sales:

January	3,000
February	3,200
March	3,700
April	3,500
May	2,900

Wesley’s ending finished goods inventory policy is 30 % of the next month’s sales.

Suppose each handisaw takes approximately 0.6 hours to manufacture, and Wesley pays an average labor wage of $28 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 30% 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% of sales dollars, and administrative expenses are fixed at $18,000 per month.

1. Compute the following for the first quarter.

           

	January	February	March	1st Quarter Total
Budgeted Sales Revenue
Budgeted Production In units
Budgeted cost of direct materials Purchases for the plastic housings
Budgeted Direct Labor Cost

Answer 1

Wesley Power Tools Budgeted Sales Revenue January February March 1st Quarter 3700 Units 3000 3200 9900 Selling Price 38 38 38 38 Total Sales 121600 114000 140600 376200 Budgeted Production in Units January February March 1st Quarter April Units 3000 3200 3700 9900 3500 Ending Inventory 1110 1050 960 1050 780 4750 10950 4280 3960 4310 -960 -1050 Opening Inventory 900 -1110 -900 Production 3060 3350 3640 10050 3230 Budgeted cost of Direct Material Purchases January February March 1st Quarter Production 3060 3350 3640 10050 Ending Inventory 1005 1092 969 969 4609 4065 4442 11019 -1092 Opening Inventory 918 -1005 -918 3147 3517 10101 3437 Cost per handisaw Cost pf Raw material 9.5 9.5 9.5 9.5 5+4.50 29897 32652 33412 95960 Direct Labour Budget 1st Quarter January February March Production 3060 3350 3640 10050 Direct Labour Required 0.6 0.6 0.6 0.6 Total Hours required 1836 2010 2184 6030 Direct Labour cost per hour 28 28 28 28 Total Labour Cost 51408 56280 61152 168840

В F Wesley Power Tools 1 2 Budgeted Sales Revenue 3 February March 1st Quarter 4 January -SUM(B5:D5 3200 3700 5 Units 3000 6 Selling Price 38 38 38 38 7 Total Sales ЕB5*B6 ЕC5*C6 D5*D6 E5*E6 8 9 Budgeted Production in Units April February March 1st Quarter 10 January C5 -SUM(B11:D11) 11 Units -B5 -D5 3500 12 Ending Inventory C11*0.3 D11*0.3 F11 0.3 D12 - 3900 *0.2 =SUM(B11:B12) -SUM(C11:C12) -SUM(D11:D12) =SUM(E11:E12) =SUM(F11:F12) 13 14 Opening Inventory -B11*0.3 -D12 -B12 E-C12 -B14 15 Production =SUM(B13:814) =SUM(C13:C14) -SUM(D13:D14) SUM(E13:E14) -SUM(F13:F14) 16 17 Budgeted cost of Direct Material Purchases February March 18 January 1st Quarter 19 Production D15 -B15 C15 -E15 -C19 0.3 20 Ending Inventory F15*0.3 D19*0.3 -D20 -SUM(B19:B20) -SUM(C19:C20) =SUM(D19:D20) -SUM(E19:E20) 21. 22 Opening Inventory -B19*0.3 -B20 -C20 B22 -SUM(B21:B22) -SUM(E21:E22) -SUM(C21:C22) -SUM(D21:D22) 23 24 Cost per handisaw 5+4.50 9.5 9.5 9.5 9.5 Raw material B23*B24 C23*C24 D23*D24 -E23*E24 25 Cost 26 27 Direct Labour Budget February March 1st Quarter 28 January 29 Production B19 C19 -D19 -E19 30 Direct Labour Required 31 Total Hours required 0.6 0.6 0.6 0.6 -B29*B30 ЕC29"С30 D29*D30 -E29*E30 32 Direct Labour cost per hour 28 28 28 28 33 Total Labour Cost -831*B32 Ес31*с32 -D31*D32 -Е31*Е32 34 EL