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.) Sales (units) Total needs SPIFFY SHADES CORPORATION Budget for Production and Direct Labor For the First Quarter of 20x1 January Month February March Quarter
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.) Sales (units) Total needs SPIFFY SHADES CORPORATION Budget for Production and Direct Labor For the First Quarter of 20x1 January Month February March Quarter
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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![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 1 hour to 0.75 hour.
Labor-related costs include pension contributions of $0.50 per hour, workers' compensation insurance of $0.20 per hour.
employee medical insurance of $0.80 per hour, and employer contributions to Social Security equal to 7 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 $18.00 per hour on April 1, 20x1. Management
expects to have 16,000 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 50 percent of the second following month's sales.
These and other data compiled by Demarest are summarized in the following table.
Direct-labor hours per unit
Wage per direct-labor hour.
Estimated unit sales.
Sales price per unit
Production overhead:
Shipping and handling (per unit sold)
Purchasing, material handling, and i
inspection (per unit produced)
Other production overhead (per
direct-labor hour)
January
1.0
$ 16.00
10,000
$ 50.00
$ 2.00
$ 3.00
$ 7.00
N
8
February
1.0
$ 16.00
12,000
$ 47.50
$ 2.00
$ 3.00
$ 7.00
March
0.75
$ 16.00
8,000
$ 47.50
$ 2.00
$ 3.00
$7.00
April
0.75
$18.00
9,000
$ 47.50
$ 2.00
$ 3.00
$7.00
May
0.75
$18.00
9,000
$ 47.50
$ 2.00
$ 3.00
$ 7.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7f0a31e-149e-4057-91bc-41e0ddd41717%2F20869d35-4c05-4998-8ea9-8c3edb2a9f88%2Fq4qgln9_processed.jpeg&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 1 hour to 0.75 hour.
Labor-related costs include pension contributions of $0.50 per hour, workers' compensation insurance of $0.20 per hour.
employee medical insurance of $0.80 per hour, and employer contributions to Social Security equal to 7 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 $18.00 per hour on April 1, 20x1. Management
expects to have 16,000 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 50 percent of the second following month's sales.
These and other data compiled by Demarest are summarized in the following table.
Direct-labor hours per unit
Wage per direct-labor hour.
Estimated unit sales.
Sales price per unit
Production overhead:
Shipping and handling (per unit sold)
Purchasing, material handling, and i
inspection (per unit produced)
Other production overhead (per
direct-labor hour)
January
1.0
$ 16.00
10,000
$ 50.00
$ 2.00
$ 3.00
$ 7.00
N
8
February
1.0
$ 16.00
12,000
$ 47.50
$ 2.00
$ 3.00
$ 7.00
March
0.75
$ 16.00
8,000
$ 47.50
$ 2.00
$ 3.00
$7.00
April
0.75
$18.00
9,000
$ 47.50
$ 2.00
$ 3.00
$7.00
May
0.75
$18.00
9,000
$ 47.50
$ 2.00
$ 3.00
$ 7.00
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.)
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
Show Transcribed Text
SPIFFY SHADES CORPORATION
Budget for Production and Direct Labor
For the First Quarter of 20x1
Problem 9-31 Part 3
January
Shipping and handling
Purchasing, material handling, and inspection
Other overhead
Total production overhead
Month
February
3. Prepare a production overhead budget for each month and for the first quarter.
SPIFFY SHADES CORPORATION
Production Overhead Budget
For the First Quarter of 20x1
January
Ć
March
Month
February
March
Quarter
Quarter
4
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