Question

Wesley Power Tools manufactures a wide variety of tools, and one of its more popular items is a cordless power handisaw, selling for $50 each. Wesley expects the following unit sales: January 2,300; February 2,300; March 2,900; April 2,600; May 2,100. Wesley's ending finished goods inventory policy is 40 percent of the next month's sales. Suppose each handisaw takes approximately 0.55 hours to manufacture.

a. Calculate the number of handisaws Wesley plans to produce in June.
b. Determine the total production cost for the handisaws in June, assuming direct labor cost is $12 per hour.
c. Find the total revenue from the sale of handisaws in April.
d. Assess the value of the ending finished goods inventory at the end of February.

Answer 1

Wesley plans to produce 2,100 handisaws in June, and the total production cost will be $12.10 considering only the direct labor cost. The total revenue from the sale of handisaws in April will be $130,000. The value of the ending finished goods inventory at the end of February will be 1,160 handisaws.

Step-by-step explanation:

To calculate the number of handisaws Wesley plans to produce in June, we need to determine the ending finished goods inventory for May. The ending finished goods inventory for May would be 40% of the June sales, which means Wesley plans to produce 2,100 handisaws in June.

To determine the total production cost for the handisaws in June, we multiply the number of handisaws produced in June by the labor hours required to manufacture one handisaw. Given that each handisaw takes 0.55 hours to manufacture and Wesley plans to produce 2,100 handisaws in June, the total production cost will be $12.10, considering only the direct labor cost.

The total revenue from the sale of handisaws in April can be calculated by multiplying the number of handisaws sold in April (which is 2,600) by the unit price of $50. Thus, the total revenue from the sale of handisaws in April will be $130,000.

To assess the value of the ending finished goods inventory at the end of February, we need to calculate 40% of the March sales. The ending finished goods inventory at the end of February will be 40% of 2,900, which is 1,160 handisaws.