Question
Prepare a production budget and a direct manufacturing labor cost budget for PetersonPeterson Company by month and for the first quarter of 20182018. You may
Prepare a production budget and a direct manufacturing labor cost budget for
PetersonPeterson
Company by month and for the first quarter of
20182018.
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.)
In addition to wages, direct manufacturing labor-related costs include pension contributions of $0.50 per hour, worker's compensation insurance of $0.10 per hour, employee medical insurance of $0.30 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 Peterson on its direct manufacturing employees is treated as a direct manufacturing labor cost.
Peterson has a labor contract that calls for a wage increase to $ 11 per hour on April 1, 2018. New labor-saving machinery has been installed and will be fully operational by March 1, 2018. Peterson expects to have 22 comma 500 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.
| Peterson Company | |||
| Budget for Production and Direct Manufacturing Labor | |||
| For the Quarter Ended March 31, 2018 | |||
| January | February | March | |
| Budgeted sales (units) | |||
| Add target ending finished goods inventory (units) | |||
| Total requirements (units) | |||
| Deduct beginning finished goods inventory (units) | |||
| Units to be produced | |||
| Direct manufacturing labor-hours per unit | |||
| Total hours of direct manufacturing labor time needed | |||
| 2018 | |||||
| January | February | March | April | May | |
| Estimated sales in units | 14,000 | 18,000 | 9,000 | 10,000 | 10,000 |
| Selling price | $55.00 | $51.50 | $51.50 | $51.50 | $51.50 |
| Direct manufacturing labor-hours per unit | 3.5 | 3.5 | 1.5 | 1.5 | 1.5 |
| Wage per direct manufacturing labor-hour | $12.00 | $12.00 | $12.00 | $11.00 | $11.00 |
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