Preparing Operating Budget Components Wesley Power Tools manufactures a wide var
ID: 2600670 • Letter: P
Question
Preparing Operating Budget Components Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items s a cordiess power bandlsaw, Each bandisaw sells for $44. Wesley expects the following unit sales: January February March April May 2.000 2.200 2,700 2,500 1,900 Wesley's ending finished goods inventory policy is 30 percent of the next month's sales Suppose each bandisaw takes approximately 0.75 hours to manufacture, and Wesley pays an average labor wage of $18 per hour Each bandisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $7.00 each. The company has an ending raw materials inventory policy of 25 percent of the following month's production requirements. Materials other than the housing unit total $4.50 per bandisaw Manufacturing overhead for this product includes $72,900 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 Prepare the tollowing for the first quarter 1. Sales budget. 2. Production budget. 3. Raw materials purchases budget for the plastic housings. 4. Direct labor budget Prepare the tollowing for the first quarter 5. Cost of goods sold budget. 6. Selling and administrative expense budget. 7. Budgeted income statement for the baodisaw product.Explanation / Answer
Wasely Power - Budget - 1st Quarter Particulars January Feburary March Total 1. Sales Budget: Budgeted Sales unit 2000 2200 2700 6900 Selling Price $44 $44 $44 $44 Budgeted Sales Value $88,000 $96,800 $118,800 $303,600 2. Production Budget: Budgeted Sales Unit 2000 2200 2700 6900 Budgeted ending inventory (30% of next month sale) 660 810 750 2220 Budgeted Opening inventory (30% of monthly Sale) 600 660 810 2070 Budgeted Production Units (Sales + Closing Stock - Opening Stock) 2060 2350 2640 7050 3. Raw Material Purchasing Budget for plastic housing: Budgted Production Units 2060 2350 2640 7050 Raw material requirement per unit 1 1 1 1 Raw material of plastic housin requirement 2060 2350 2640 7050 Budgeted ending inventory (25% of next month production) 588 660 580 1828 Budgeted Opening inventory (25% of month production) 515 588 660 1763 Raw Material Purchase units (Production + Closing Stock - Opening Stock) 2133 2422 2560 7115 Plastic housing unit cost $7 $7 $7 $7 Purcahase cost of plastic housing $14,931 $16,954 $17,920 $49,805 4. Direct Labor Budget Budgted Production Units 2060 2350 2640 7050 time required per unit (In Hrs) 0.75 0.75 0.75 0.75 Total Time required (In Hours) 1545 1762.5 1980 5287.5 Labor rate (Per hour) $18 $18 $18 $18 Direct Labor Cost $27,810 $31,725 $35,640 $95,175