Preparing Operating Budget Components
Black&Decker (B D) manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Use the following fictitious information about this product line to complete the problem requirements. Each handisaw sells for $40. B D expects the following unit sales.
January | 2,000 |
February | 2,200 |
March | 2,700 |
April | 2,500 |
May | 1,900 |
B D’s ending finished goods inventory policy is 25 percent of the next month’s sales.
Suppose each handisaw takes approximately 0.75 hours to manufacture, and B D pays an average labor wage of $16.50 per hour.
Each handisaw requires a plastic housing that B D purchases from a supplier at a cost of $7.00 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 $1.10 per unit variable manufacturing overhead. B D’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.
Required:
Prepare the following for the first quarter:
1.Sales budget.
2. Production budget.
3. Raw materials purchases budget for the plastic housings.
4. Direct labor budget.
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