Required information
Problem 9-31 Production and Direct-Labor Budgets; Activity-BasedOverhead Budget (LO 9-3, 9-4, 9-5, 9-6)
[The following information applies to the questionsdisplayed below.]
Spiffy Shades Corporation manufactures artistic frames forsunglasses. Talia Demarest, controller, is responsible forpreparing the company’s master budget. In compiling the budget datafor 20x1, Demarest has learned that new automated productionequipment will be installed on March 1. This will reduce the directlabor per frame from 1.0 hour to 0.75 hour.
Labor-related costs include pension contributions of $1.30 perhour, workers’ compensation insurance of $1.00 per hour, employeemedical insurance of $4 per hour, and employer contributions toSocial Security equal to 7.00 percent of direct-labor wages. Thecost of employee benefits paid by the company on its employees istreated as a direct-labor cost. Spiffy Shades Corporation has alabor contract that calls for a wage increase to $15.00 per hour onApril 1, 20x1. Management expects to have 16,200 frames on hand atDecember 31, 20x0, and has a policy of carrying an end-of-monthinventory of 100 percent of the following month’s sales plus 40percent of the second following month’s sales.
These and other data compiled by Demarest are summarized in thefollowing table.
| January | February | March | April | May |
| Direct-labor hours per unit | | 1.0 | | | 1.0 | | | 0.75 | | | 0.75 | | | 0.75 | |
| Wage per direct-labor hour | $ | 13.00 | | $ | 13.00 | | $ | 13.00 | | $ | 15.00 | | $ | 15.00 | |
| Estimated unit sales | | 11,000 | | | 13,000 | | | 9,000 | | | 10,000 | | | 10,000 | |
| Sales price per unit | $ | 64.00 | | $ | 61.50 | | $ | 61.50 | | $ | 61.50 | | $ | 61.50 | |
| Production overhead: | | | | | | | | | | | | | | | |
| Shipping and handling (per unit sold) | $ | 2.00 | | $ | 2.00 | | $ | 2.00 | | $ | 2.00 | | $ | 2.00 | |
| Purchasing, material handling, and inspection (per unitproduced) | $ | 3.00 | | $ | 3.00 | | $ | 3.00 | | $ | 3.00 | | $ | 3.00 | |
| Other production overhead (per direct-labor hour) | $ | 6.00 | | $ | 6.00 | | $ | 6.00 | | $ | 6.00 | | $ | 6.00 | |
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Prepare a production budget and a direct-labor budget for SpiffyShades Corporation by month and for the first quarter of 20x1.(Round "Direct-labor hours per unit" to 2 decimal places.)
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| | SPIFFY SHADES CORPORATION | | Budget for Production and DirectLabor | | For the First Quarter of 20x1 | | Month | | | January | February | March | Quarter | | Sales (units) | 11,000 | 13,000 | 9,000 | 33,000 | | Add: Ending inventory | | | | | | Total needs | 11,000 | 13,000 | 9,000 | 33,000 | | | | | | | Units to be produced | | | | | | Direct-labor hours per unit | | | | | | Total hours of direct labor timeneeded | 0 | 0 | 0 | 0 | | Direct-labor costs: | | | | | | Wages | | | | | | Pension contributions | | | | | | Workers' compensation insurance | | | | | | Employee medical insurance | | | | | | Employer's social security | | | | | | Total direct-laborcost | $0 | $0 | $0 | $0 |
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For each item used in the firm’s production budget anddirect-labor budget, select the other components of the masterbudget (except for financial statement budgets) that also, directlyor indirectly, would use these data. (You may select morethan one answer. Single click the box with the question mark toproduce a check mark for a correct answer and double click the boxwith the question mark to empty the box for a wronganswer.)
Sales data:
- Selling and administrative expense budgetunanswered
- Production-overhead budgetunanswered
- Direct-material budgetunanswered
- Cash budgetunanswered
- Cost-of-goods-sold budgetunanswered
- Sales budgetunanswered
- Cash disbursements budgetunanswered
Production data:
- Selling and administrative expense budgetunanswered
- Direct-material budgetunanswered
- Cost-of-goods-sold budgetunanswered
- Production-overhead budgetunanswered
- Cash budgetunanswered
- Cash disbursements budgetunanswered
- Sales budgetunanswered
Direct-labor-hour data:
- Selling and administrative expense budgetunanswered
- Production-overhead budgetunanswered
- Direct-material budgetunanswered
- Cash budgetunanswered
- Cost-of-goods-sold budgetunanswered
- Sales budgetunanswered
- Cash disbursements budgetunanswered
Direct-labor cost data:
- Selling and administrative expense budgetunanswered
- Production-overhead budgetunanswered
- Direct-material budgetunanswered
- Cash budgetunanswered
- Sales budgetunanswered
- Cost-of-goods-sold budgetunanswered
- Cash disbursements budget
Prepare a production overhead budget for each month and for thefirst quarter.
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| | SPIFFY SHADES CORPORATION | | Production Overhead Budget | | For the First Quarter of 20x1 | | Month | | | January | February | March | Quarter | | Shipping and handling | | | | | | Purchasing, material handling, andinspection | | | | | | Other overhead | | | | | | Total productionoverhead | $0 | $0 | $0 | $0 |
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