Chapter 8, Problem 4.3GAP

Preparing Operating Budget Components
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 $44. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 30 percent of the next month’s sales.
Suppose each handisaw takes approximately 0.75 hours to manufacture, and Wesley pays an average labor wage of $18 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 25 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
Manufacturing overhead for this produce 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 following for the first quarter:
Raw materials purchases budget tor the plastic housings.