Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controllet, is 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) January 1.0 $16.00 10,000 $ 50.00 $ 2.00 $ 3.00 $ 7.00 February 01.0 $ 16.00 12,000 $ 47.50 $ 2.00 $ 3.00 $ 7.00 March 0.75 $16.00 8,000 $47.58 $ 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 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 manufactures artistic frames for sunglasses. Talia Demarest, controllet, is 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) January 1.0 $16.00 10,000 $ 50.00 $ 2.00 $ 3.00 $ 7.00 February 01.0 $ 16.00 12,000 $ 47.50 $ 2.00 $ 3.00 $ 7.00 March 0.75 $16.00 8,000 $47.58 $ 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 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.)
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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Transcribed Image Text:Sales (units)
Add: Ending inventory
Total needs
Less: Beginning inventory
Units to be produced
SPIFFY SHADES CORPORATION
Budget for Production and Direct Labor
For the First Quarter of 20x1
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
January
$
0
0
0
Month
February
0 $
0
0
0
$
March
0
0
0
0
Quarter
0
0
0
0
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)
January
1.0
$ 16.00
10,000
$ 50.00
$ 2.00
$ 3.00
$ 7.00
February
1.0
$ 16.00
12,000
$ 47.50
$ 2.00
$ 3.00
$ 7.00
March
0.75
$16.00
8,000
$47.58
$ 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
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.)
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