Problem 9-31 Production and Direct-Labor Budgets; Activity-Based Overhead Budget (LO 9-3, 9-4, 9-5, 9- [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 27.400 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 April 0.75 $ 17.ee 19.00 $68. February 1.0 17.00 21.000 $ 65.50 March .75 $ 17.00 17.000 $65.58 19.ee 18. 18,000 65.5e 0.75 $ 19.00 18,000 $ 65.se 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) $ 5.ee 55.00 $ 5. 5. 55. $ 5.ee $ 6.00 $ 6.00 $ 6.00 6.00 $ 6. 6.00 $ 6.00 $ 6.ee $ 6.00 Problem 9-31 Part 3 3. Prepare a production overhead budget for each month and for the first quarter. Answer is complete but not entirely correct. SPIFFY SHADES CORPORATION Production Overhead Budget For the First Quarter of 201 Month January February March Shipping and handling 05.000 S 105,000 S 05.000 ls Purchasing material handling and inspection 110,400 104 400 100.000 Other overhead 439.100 304 110 18.000 Total production overhead $ 650,500 S 603,510 $ 211.000 285.000 54 800 x 066.000