Question

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisew sells for $70. Wesley expects the following unit sales: 1.000 2.50 2.300 Suppose each handisaw takes approximately 0.55 hours to manufacture, and Wesley pays an average labor wage of $12.50 per hour. Each hand saw requires a plastic housing that Wesley purchases from a supplier at a cost of $4.00 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 $4,50 per handsaw. Manufacturing overhead for this product includes $60,000 annual fixed overhead (based on production of 21000 units) and $0.80 per unit variable manufacturing overhead. Wesley's selling expenses are 4 percent of sales dollars, and administrative expenses are fixed Required: 1. Compute the budgeted cost of goods sold for the first quarter 3. Complete the budgeted Income statement for the hand saw product for the first quarter < Prey 7 of 7 Next

Answer 1

Solution 1:

Computation of budgeted manufacturing cost per handishaw - Wesley Power Tool
Particulars	Per Unit
Direct Material ($4 + $4.50)	$8.50
Direct labor (0.55*$12.50)	$6.88
Variable manufacturing overhead	$0.80
Fixed manufacturing overhead ($60,000/21000)	$2.86
Budgeted manufacturing cost per unit	$19.03
Computation of budgeted cost of goods sold - Wesley Power Tools
Particulars	January	February	March	1st Quarter Total
Expected sales units	2100	2500	3000	7600
Manufacturing cost per unit	$19.03	$19.03	$19.03	$19.03
Budgeted cost of goods sold	$39,963	$47,575	$57,090	$1,44,628

Solution 2:

Budgeted Selling and administrative expenses- Wesley Power
Particulars	January	February	March	1st Quarter Total
Expected sales unit	2100	2500	3000	7600
Selling price per unit	$70	$70	$70	$70
Budgeted sales	$1,47,000	$1,75,000	$2,10,000	$5,32,000
Selling expenses (4% of sales)	$5,880	$7,000	$8,400	$21,280
Administrative expenses	$17,000	$17,000	$17,000	$51,000
Budgeted Selling and administrative expenses	$22,880	$24,000	$25,400	$72,280

Solution 3:

Budgeted Income Statement- Wesley Power
Particulars	January	February	March	1st Quarter Total
Budgeted sales	$1,47,000	$1,75,000	$2,10,000	$5,32,000
Budgeted cost of goods sold	$39,963	$47,575	$57,090	$1,44,628
Budgeted Gross profit	$1,07,037	$1,27,425	$1,52,910	$3,87,372
Budgeted Selling and administrative expenses	$22,880	$24,000	$25,400	$72,280
Budgeted net operating income	$84,157	$1,03,425	$1,27,510	$3,15,092