1. Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the first quarter of 20x1. (Round "Direct-labor hours per unit" to 2 decimal places.)
1. Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the first quarter of 20x1. (Round "Direct-labor hours per unit" to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
I don't understand how to prepare the production and direct labor budget that is needed for this problem.
![!
Required information
Problem 9-31 Production and Direct-Labor Budgets; Activity-Based Overhead Budget (LO 9-3, 9-4, 9-5, 9-
6)
[The following information applies to the questions displayed below.]
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for
preparing the company's master budget. In compiling the budget data for 20x1, Demarest has learned that new automated
production equipment will be installed on March 1. This will reduce the direct labor per frame from 3.0 hours to 2.75 hours.
Labor-related costs include pension contributions of $1.05 per hour, workers' compensation insurance of $0.75 per hour,
employee medical insurance of $3 per hour, and employer contributions to Social Security equal to 8.00 percent of direct-
labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost. Spiffy
Shades Corporation has a labor contract that calls for a wage increase to $17.00 per hour on April 1, 20x1. Management
expects to have 14,900 frames on hand at December 31, 20x0, and has a policy of carrying an end-of-month inventory of
100 percent of the following month's sales plus 30 percent of the second following month's sales.
These and other data compiled by Demarest are summarized in the following table.
February
March
April
January
3.0
Мay
Direct-labor hours per unit
Wage per direct-labor hour
Estimated unit sales
3.0
2.75
2.75
2.75
$ 15.00
11,000
$ 50.00
$ 15.00
13,000
$ 47.50
$15.00
9,000
$ 47.50
$ 17.00
10,000
$ 47.50
$ 17.00
10,000
$ 47.50
Sales price per unit
Production overhead:
$ 4.00
Shipping and handling (per unit sold)
Purchasing, material handling, and
inspection (per unit produced)
Other production overhead (per
direct-labor hour)
$
4.00
$
4.00
$
4.00
$
4.00
$
5.00
$
5.00
$ 5.00
$
5.00
$
5.00
$
8.00
$
8.00
$ 8.00
$
8.00
$
8.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb95e703f-1fc6-4ebe-8678-060fc14f5a04%2F20222aae-d9b3-444d-a202-98a8d5636a5d%2Fzyd6do3_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
Problem 9-31 Production and Direct-Labor Budgets; Activity-Based Overhead Budget (LO 9-3, 9-4, 9-5, 9-
6)
[The following information applies to the questions displayed below.]
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for
preparing the company's master budget. In compiling the budget data for 20x1, Demarest has learned that new automated
production equipment will be installed on March 1. This will reduce the direct labor per frame from 3.0 hours to 2.75 hours.
Labor-related costs include pension contributions of $1.05 per hour, workers' compensation insurance of $0.75 per hour,
employee medical insurance of $3 per hour, and employer contributions to Social Security equal to 8.00 percent of direct-
labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost. Spiffy
Shades Corporation has a labor contract that calls for a wage increase to $17.00 per hour on April 1, 20x1. Management
expects to have 14,900 frames on hand at December 31, 20x0, and has a policy of carrying an end-of-month inventory of
100 percent of the following month's sales plus 30 percent of the second following month's sales.
These and other data compiled by Demarest are summarized in the following table.
February
March
April
January
3.0
Мay
Direct-labor hours per unit
Wage per direct-labor hour
Estimated unit sales
3.0
2.75
2.75
2.75
$ 15.00
11,000
$ 50.00
$ 15.00
13,000
$ 47.50
$15.00
9,000
$ 47.50
$ 17.00
10,000
$ 47.50
$ 17.00
10,000
$ 47.50
Sales price per unit
Production overhead:
$ 4.00
Shipping and handling (per unit sold)
Purchasing, material handling, and
inspection (per unit produced)
Other production overhead (per
direct-labor hour)
$
4.00
$
4.00
$
4.00
$
4.00
$
5.00
$
5.00
$ 5.00
$
5.00
$
5.00
$
8.00
$
8.00
$ 8.00
$
8.00
$
8.00
Transcribed Image Text:Required:
1. Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the first quarter of 20x1.
(Round "Direct-labor hours per unit" to 2 decimal places.)
SPIFFY SHADES CORPORATION
Budget for Production and Direct Labor
For the First Quarter of 20x1
Month
January
February
March
Quarter
Sales (units)
Total needs
Units to be produced
Direct-labor hours per unit
Total hours of direct labor time needed
Direct-labor costs:
Wages
Pension contributions
Workers' compensation insurance
Employee medical insurance
Employer's social security
Total direct-labor cost
2$
$
$
$
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education