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# Preparing Operating Budget Components

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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
________________________________________

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

I have tried to figure it out and keep getting it wrong.

For January, I tried 2100 - (2100*10%) + (2600*10%)= 12900

Took 2150 *6 = 12900 (That was wrong)
Tried (2150*6) + (2150*3.50)= 20425
I also tried: 22420, 14160, 8260 all of these came up wrong

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

I don't know whether the selling and administrative expenses are included or not.