Wesley Power Tools manufactures a wide variety of tools and accessories. One of

Question

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Use the following information about this product line to complete the problem requirements. Each handisaw sells for $46. Wesley expects the following unit sales: 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 $22 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 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: (Round your intermediate calculations for Direct Labor Budget to 2 decimal places and other intermediate calculations to nearest whole dollar.)

Explanation / Answer

calculation of production units

particulars january february march

1.opening stock 950(3800 x .25) 1000 1125

2.sales 3800 4000 4500

3. closing stock 1000 (4000 x .25) 1125 ( 4500 x.25) 1075 ( 4300 x .25)

4 production units( 2+3-1) 3850 4125 4450

calculation of purchase of plastic housing

particulars january february march

1. openig stock 770( 3850 x.2) 825 890

2.production units 3850 4125 4450

3.closing stock 825 (4125 x.2) 890 (4450 x.2) 830 (4150 x .2)

4 purchases ( 2+3-1) 3905 4190 4390

calculation of labour hours( rate = $ 22/hour)

particulars january february march

1 .production units 3850 4125 4450

2. hours required ( 1 x 0.6 hr) 2310 2475 2670

3 amount paid ( 2 x 22) $ 50820 54450 58740

answer to question

particulars january february march total

1 .budgeted sales revenue $ 174800 184000 207000 565800

(3800, 4000, 4500 x 46)

2 . budgeted production units 3850 4125 4450 12425

( first working)

3. budgeted purchases of plastic housing $

(3905 , 4190, 4390 x 5 ) 19525 20950 21950 62425

4. Budgeted labour cost    50820 54450 58740 164010

( as per calculations)

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