Johnston Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron Bahar, the controller, is responsible for preparing Johnston's master budget and has accumulated the following information for 2018: (Click the icon to view some of the financial information.) (Click the icon to view additional information.) Read the requirements. Requirement 1. Prepare a production budget and a direct manufacturing labor cost budget for Johnston Company by month and for the first quarter of 2018. You may combine both budgets in one schedule. The direct manufacturing labor cost budget should include labor-hours and show the details for each labor cost category. Start the schedule by preparing the production budget and calculating the total hours of direct manufacturing labor time needed for the three months in the quarter, then calculate the values for the quarter. Finish by preparing the bottom portion of the schedule for the direct manufacturing labor by month, then quarter. (Enter the direct manufacturing labor-hours per unit to one decimal place, X.X. Do not round interim calculations, and then enter all amounts in the budget (other than the direct manufacturing labor-hours per unit] to the nearest whole number.) March Quarter 44,000 8,000 16,500 Johnston Company Budget for Production and Direct Manufacturing Labor For the Quarter Ended March 31, 2018 January February Budgeted sales (units) 17,000 19,000 23,000 13,500 Add target ending finished goods inventory (units) Total requirements (units) 40,000 32,500 Deduct beginning finished goods inventory (units) 23,000 23,000 Units to be produced 17,000 9,500 3.5 3.5 Direct manufacturing labor-hours per unit 59,500 33,250 Total hours of direct manufacturing labor time needed 16,500 24,500 13,500 60,500 23,000 11,000 37,500 2.0 22,000 114,750 Direct manufacturing labor costs: Wages Pension contributions Workers' compensation insurance Employee medical insurance Social Security tax (employer's share) Total direct manufacturing labor costs More info Requirements In addition to wages, direct manufacturing labor-related costs include pension contributions of $0.60 per hour, worker's compensation insurance of $0.10 per hour, employee medical insurance of $0.50 per hour, and Social Security taxes. Assume that as of January 1, 2018, the Social Security tax rates are 7.5% for employers and 7.5% for employees. The cost of employee benefits paid by Johnston on its direct manufacturing employees is treated as a direct manufacturing labor cost. 1. Prepare a production budget and a direct manufacturing labor cost budget for Johnston Company by month and for the first quarter of 2018. You may combine both budgets in one schedule. The direct manufacturing labor cost budget should include labor-hours and show the details for each labor cost category. 2. What actions has the budget process prompted Johnston's management to take? 3. How might Johnston's managers use the budget developed in requirement 1 to better manage the company? Johnston has a labor contract that calls for a wage increase to $14 per hour on April 1, 2018. New labor-saving machinery has been installed and will be fully operational by March 1, 2018. Johnston expects to have 23,000 frames on hand at December 31, 2017, and it has a policy of carrying an end-of-month inventory of 100% of the following month's sales plus 50% of the second following month's sales. Print Done Print Dono Data table 2018 March April May January February 17,000 19,000 Estimated sales in units 8,000 11,000 11,000 $ 55.00 $ 51.50 $ 51.50 $ 51.50 $ 51.50 Selling price Direct manufacturing labor-hours per unit Wage per direct manufacturing labor-hour 3.5 3.5 2.0 2.0 2.0 $ 12.00 $ 12.00 $ 12.00 $ 14.00 $ 14.00 Duit