
Later in the Basic rulebook there is an example combat where the sleep spell is used by the venerable Silverleaf (and alas, the namesake Black Dougal is already dead at this point).
At the beginning of the illustrated encounter, "He quickly warns the others that he may have to use his sleep spell."
After the Reaction Rolls are made:

Interesting that it does say, "making sure that they do not get caught in the spell's area of effect" and then not giving an area of effect under the spell description.
Honestly, I don't remember how I ruled this back in the day but now I let the player pick a point within the spell's range and apply the number of enemy hit dice affected from that point out so long as it doesn't extend past the spell's range. I also allow the spell to only affect enemies.
How do you run the Sleep spell in Moldvay?
1. What is the area of effect?
2. Does it affect allies?