production overhead budget f
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I'm having trouble preparing the production
![!
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%2F3cd173e9-1d75-4a00-b80d-9884d0394620%2Fapei9sq_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: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
Month
January
February
March
Quarter
Shipping and handling
Purchasing, material handling, and inspection
$
44,000
2$
52,000 $
36,000
2$
132,000
Other overhead
Total production overhead
$
44,000 $
52,000
$
36,000
$
132,000
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