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. Talia 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 10 hour to 0.75 hour. 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 5.00 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 $19.00 per hour on April 1, 20x1, Management expects to have 27400 frames on hand at December 31, 20xo, 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. January February March Direct-labor hours per unit 1.0 1.2 2.75 Wage per direct-labor hour $ 17.00 $ 17.00 $ 17.ee Estimated unit sales 19.0 21.0 17.ee Sales price per unit $ 68.00 65.5e5 65.50 Production overhead: Shipping and handling (per unit sold) 5.ee Purchasing, material handling, and inspection (per unit produced) $ 6.00 6. 56. Be Other production overhead (per direct-labor hour) 56.ee April 2.75 $ 19. 18,082 $65.se May 0.75 $19.ee 18, Bee $65.5e 3 5.0 $ 5.00 $ 5.ee 5 6.00 $ 6.ee $ 6.60 $ 6.ee Problem 9-31 Part 3 3. Prepare a production overhead budget for each month and for the first quarter. * Answer is not complete. SPIFFY SHADES CORPORATION Production Overhead Budget For the First Quarter of 201 Month March Quarter Shipping and handling Purchasing material handling and inspection January 05.000 110.400 February 105,000 104 400 85.000 31.000 285.000 301 800 Other Overhead Total production overhead 3 211,400 200.400 100.000 500.000 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 1 hour to 0.75 hour. Labor-related costs include pension contributions of $105 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 5.00 percent of directe 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 $19.00 per hour on April 1, 20x1. Management expects to have 27.400 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 April March e January 1. $12. 19. February 1. e 5 17. 22. 0.75 19. 18,00 17 65.5e 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) Problem 9-31 Part 1 Required: 1. Prepare a production budget and a direct labor budget for Spifty Shades Corporation by month and for the first quarter of 20x1. (Round "Direct-labor hours per unit" to 2 decimal pieces.) FY SHADES CORP Budget for Produce and Direct Labor For the First Quarter of 201 anuary February March Quarter 27.800 24 2001 25200 46 300 45 200 Sales units) Add Ending inventory Total needs Loss Beginning invento Units to be produ Direct-abor hours Total hours of direct labor 24 2001 27.400 10.400 2.800 17.4001 1.00 10.400 1.00 17.400 0.75 13.500 50.300 5 329.000 3 205 8005 229 500S 356 100 Wages Pension contribution Workers' compensat 1 3060 10.125 37 725 14.650 2001 10.400 200 0 .500 150 000 14700147842.758 Employers sociale Tot direct