Problem: Black & Decker (B&D) manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Use the following fictitious information about this product line to complete the problem requirements. Each handisaw sells for $50. B&D expects the following unit sales.
January 2,100
February 2,600
March 3,000
April 2,800
May 2,000
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B&D's ending finished goods inventory policy is 35 percent of the next month's sales.
Suppose each handisaw takes approximately .35 hours to manufacture, and B&D pays an average labor wage of $13.50 per hour.
Each handisaw requires a plastic housing that B&D purchases from a supplier at a cost of $6.00 each. The company has an ending raw materials inventory policy of 10 percent of the following month's production requirements. Materials other than the housing unit total $3.50 per handisaw.
Manufacturing overhead for this product includes $66,000 annual fixed overhead (based on production of 21,000 units) and $.90 per unit variable manufacturing overhead. B&D's selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $17,000 per month.
Problem 1: Calculate the production budget for Black & Decker (B&D) for the first quarter (January, February, and March). Include each month as well as the first quarter.
January:
February:
March:
Total
Problem 2: Calculate the raw materials purchases budget for the plastic housings for Black & Decker (B&D) for the first quarter (January, February, and March). Include each month as well as the first quarter.
January
February
March
Total