Problem 9-31 Production and Direct-Labor Budgets; Activity-Based Overhead Budget (LO 9-3, 9-4, 9-5, 9- 6) [The following information applies to the questions displayed below] Spiffy 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 5.0 hours to 4.75 hours. Labor-related costs include pension contributions of $0.80 per hour, workers' compensation Insurance of $0.50 per hour. employee medical insurance of $2 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 $18.00 per hour on April 1, 20x1. Management expects to have 28,800 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. N January 5.0 $ 16.00 20,000 $ 60.00 February 5.0 $ 16.00 22, eee $ 57.50 March 4.75 $ 16.00 18, eee $ 57.50 April 4.75 $ 18.00 19, eee $ 57.50 May 4.75 $ 18.00 19, eee $ 57.50 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) $ 4.00 $ 4.00 $ 4.ee $ 4.ee $ 4.ee $ 5.00 $ 5.ee $.5.ee $ 5.00 $ 5.ee $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 4.ee Problem 9-31 Part 1 Required: 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.) March Quarter 60,000 18,000 18,000 60,000 SPIFFY SHADES CORPORATION Budget for Production and Direct Labor For the First Quarter of 20x1 Month January February Sales (units) 20,000 22,000 Add: Ending inventory Total needs 20,000 22,000 Less: Beginning inventory Units to be produced 20,000 22,000 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 0 $ 0 $ 18,000 60,000 0 0 0 $ 0 3. Prepare a production overhead budget for each month and for the first quarter. SPIFFY SHADES CORPORATION Production Overhead Budget For the First Quarter of 20x1 Month January February Shipping and handling Purchasing, material handling, and inspection Other overhead Total production overhead $ 0 $ March Quarter 1 0 $ $