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 inspection (per unit produced) Other production overhead (per direct-labor hour) Shipping and handling Purchasing, material handling, and inspection Other overhead Total production overhead January 1.0 $ 16.00 10,000 $ 50.00 $ 2.00 $ 3.00 $ 7.00 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 February 1.0 $ 16.00 12,000 $ 47.50 $ 2.00 $ 3.00 $ 7.00 0 $ Month February March April 0.75 0.75 $16.00 8,000 $47.50 $ 2.00 $ 3.00 $ 7.00 $ March $18.00 9,000 $47.50 $ 2.00 $ 3.00 $ 7.00 0 $ May 8.75 $18.00 9,000 $47.50 $ 2.00 $ 3.00 $7.00 Quarter 0
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 inspection (per unit produced) Other production overhead (per direct-labor hour) Shipping and handling Purchasing, material handling, and inspection Other overhead Total production overhead January 1.0 $ 16.00 10,000 $ 50.00 $ 2.00 $ 3.00 $ 7.00 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 February 1.0 $ 16.00 12,000 $ 47.50 $ 2.00 $ 3.00 $ 7.00 0 $ Month February March April 0.75 0.75 $16.00 8,000 $47.50 $ 2.00 $ 3.00 $ 7.00 $ March $18.00 9,000 $47.50 $ 2.00 $ 3.00 $ 7.00 0 $ May 8.75 $18.00 9,000 $47.50 $ 2.00 $ 3.00 $7.00 Quarter 0
Chapter7: Budgeting
Section: Chapter Questions
Problem 3PB: TIB makes custom guitars and prepared the following sales budget for the second quarter It also has...
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Concept explainers
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.
Question
Transcribed Image Text: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
inspection (per unit produced)
Other production overhead (per
direct-labor hour)
Shipping and handling
Purchasing, material handling, and inspection
Other overhead
Total production overhead
January February
1.0
$ 16.00
10,000
$50.00
1.0
$16.00
12,000
$ 47.50
$ 2.00
$ 2.00
$ 3.00
$ 3.00
$ 7.00
$7.00
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
0 $
Month
February
March
0.75
$16.00
8,000
$47.50
$ 2.00
$ 3.00
$ 7.00
0 $
March
April
0.75
$18.00
9,000
$47.50
$2.00
$ 3.00
$ 7.00
0 $
May
0.75
$18.00
9,000
$47.50
$ 2.00
$ 3.00
$ 7.00
Quarter
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