Wesley Power Tools manufactures a wide variety of tools andaccessories. One of its more popular items is a cordless powerhandisaw. Each handisaw sells for $40. Wesley expects the followingunit sales:
| |
| January | 2,200 |
| February | 2,300 |
| March | 2,900 |
| April | 2,600 |
| May | 2,200 |
|
Wesley’s ending finished goods inventory policy is 25 percent ofthe next month’s sales.
Suppose each handisaw takes approximately 0.65 hours tomanufacture, and Wesley pays an average labor wage of $13.50 perhour.
Each handisaw requires a plastic housing that Wesley purchases froma supplier at a cost of $5.00 each. The company has an endingdirect materials inventory policy of 10 percent of the followingmonth’s production requirements. Materials other than the housingunit total $3.50 per handisaw.
Manufacturing overhead for this product includes $63,000 annualfixed overhead (based on production of 24,000 units) and $0.80 perunit variable manufacturing overhead. Wesley’s selling expenses are5 percent of sales dollars, and administrative expenses are fixedat $16,000 per month.
Required:
1. Compute the budgeted cost of goods sold for the firstquarter.
2. Compute the budgeted selling and administrativeexpenses for the first quarter.
3. Complete the budgeted income statement for thehandisaw product for the first quarter.
