Required information PR 9-31 (Algo) 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.] Shibby Shades Incorporated 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 1.0 hour to 0.75 hour. Labor-related costs include pension contributions of $1.30 per hour, workers' compensation insurance of $1.00 per hour, employee medical insurance of $4 per hour, and employer contributions to Social Security equal to 4.00 percent of direct- labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost. Shibby Shades Incorporated has a labor contract that calls for a wage increase to $21.00 per hour on April 1, 20x1. Management expects to have 23,600 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 60 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 January 1.0 Wage per direct-labor hour Estimated unit sales $ 19.00 14,000 Sales price per unit $ 60.00 February 1.0 $ 19.00 16,000 $ 57.50 March 0.75 $ 19.00 12,000 April 0.75 $ 21.00 13,000 May 0.75 $ 21.00 13,000 $ 57.50 $ 57.50 $ 57.50 Production overhead: Shipping and handling (per unit sold) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Purchasing, material handling, and inspection (per unit produced) $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 Other production overhead (per direct-labor hour) $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 PR 9-31 (Algo) Part 1: Prepare a production budget and a direct-labor budget... Required: 1. Prepare a production budget and a direct-labor budget for Shibby Shades Incorporated by month and for the first quarter of 20x1. Note: Round "Direct-labor hours per unit" to 2 decimal places. SHIBBY SHADES INCORPORATED Budget for Production and Direct Labor For the First Quarter of 20x1 Month Quarter January February March Sales (units) 14,000 16,000 12,000 42,000 Add: Ending inventory 25,600 19,200 20,800 65,600 Total needs 39,600 35,200 32,800 107,600 Less: Beginning inventory 23,600 25,600 19,200 23,600 Units to be produced 16,000 9,600 13,600 84,000 Direct-labor hours per unit 1.00 1.00 0.75 Total hours of direct labor time needed 16,000 9,600 10,200 35,800 Direct-labor costs: Wages Pension contributions Workers' compensation insurance Employee medical insurance Employer's social security Total direct-labor cost $ 0 $ 0 $ 0 $