Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $60. Wesley expects the following unit sales: January 5,200 February 5,400 March 5,900 April 5,700 May 5,100 Wesley’s ending finished goods inventory policy is 20 percent of the next month’s sales. Suppose each handisaw takes approximately .75 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 $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 $1.20 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: (Do not round your intermediate calculations.)

Wesley Power Tools

A.

Budgeted sales Revenue

Revenue = Volume x Selling price

Jan. 5,200 x $60 = $312,000

Feb. 5,400 x $60 = $324,000

Mar. 5,900 x $60 = $354,000

Q1 Total Revenue = $990,000

B.

Budget production (units)

Based on 20% finished goods ending policy

Jan.

80% of Jan Sales = 4,160

Add: 20% of Feb Sales = 1,080

January production = 5,240

Feb.

80% of Feb Sales = 4,320

Add: 20% of Mar Sales = 1,180

February production = 5,500

Mar.

80% of Mar Sales = 4,720

Add: 20% of Apr Sales = 1,140

March production = 5,860

Q1 production = $16,600

April.

80% of Apr Sales = 4,560

Add: 20% of May Sales = 1,020

April production = 5,580

C.

Cost of materials purchased to plastic housings.

Ending inventory policy is 20% of following month production plan

Jan.

$7 x 80% x Jan pdtn plan = $29,344

$7 x 20% x Feb pdtn plan = $7,700

January cost of plastics purchased = $37,044

Feb

$7 x 80% x Feb pdtn plan = $30,800

$7 x 20% x Mar pdtn plan = $8,204

February cost of plastics purchased = $39,004

Mar

$7 x 80% x Mar pdtn plan = $32,816

$7 x 20% x Apr pdtn plan = $7,812

March cost of plastics purchased = $40,628

C.

Budget Direct labour costs

Labour cost per hour = $22

0.75hr to produce 1 Handsaw

This implies labour cost per unit = $22 x 0.75hrs = $16.5

Jan. $16.5 x 5,240 = $86,460

Feb. $16.5 x 5,500 = $90,750

Mar. $16.5 x 5,860 = $96,690

Total labour in Q1 = $273,900