Greener Grass Fertilizer Company plans to sell 270,000 units of finished product in July and anticipates a growth rate in sales of 5 percent per month. The desired monthly ending inventory in units of finished product is 70 percent of the next month's estimated sales. There are 189,000 finished units in Inventory on June 30. Each unit of finished product requires 4 pounds of raw material at a cost of $1.65 per pound. There are 850,000 pounds of raw material in Inventory on June 30. Required: 1. Compute the company's total required production in units of finished product for the entire three-month period ending September 30. (Round all intermediate calculations and your final answer to the nearest unit.) 2. Independent of your answer to requirement (1), assume the company plans to produce 640,000 units of finished product in the three-month period ending September 30, and to have raw material inventory on hand at the end of the three-month period equal to 25 percent of the use in that period. Compute the total estimated cost of raw-material purchases for the entire three-month period ending September 30. 1. Total required production in units 2. Total estimated costSpiffy Shades Corporation manufactures artistic frames for sunglasses. Talla 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 2.0 hours to 1.75 hours. Labor-related costs include pension contributions of $1.05 per hour, workers' compensation insurance of $0.75 per hour, employee medical insurance of $3 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. Spiffy Shades Corporation has a labor contract that calls for a wage increase to $15.00 per hour on April 1, 20x1. Management expects to have 24,600 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 40 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 February March April MAY 2 .0 2.0 1.75 1. 75 Wage per direct-labor hour 1. 75 $ 13 .00 17,000 13 .00 13 . 00 15.00 $ 15 .00 Estimated unit sales 19,000 15,000 16,000 16,000 sales price per unit $ 50.00 $ 47.50 3 47.50 $ 47.50 $ 47.50 Production overhead: Shipping and handling (per unit sold) Purchasing, material handling, and $ 2.00 $ 2.00 5 2.00 5 2.00 $ 2.00 inspection (per unit produced) $ 3.00 $ 3.00 $ 3.00 3.00 $ 3.00 Other production overhead (per direct- labor hour) $ 9.00 $ 9.00 $ 9.00 9.00 $ 9.00 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 Budget for Production and Direct Labor For the First Quarter of 20x1 Month January February March Quarter Sales (units) Total needs 0 Units to be produced 0 0 0 Direct-labor hours per unit Total hours of direct labor time needed 0 0 Direct-labor costs: Wages Pension contributions Workers compensation insurance Employee medical insurance Employer's social security Total direct-labor cost S O S O S O S 0
