Req uired information 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 3.0 hours to 2.75 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 8.00 percent of direct- Iabor wages. The cost of employee benets 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 $17.00 per hour on April 1, 20x1. Management expects to have 14,900 frames on hand at December 31, 20x0, and has a policy of carrying an endofmonth inventory of 100 percent of the following month's sales plus 30 percent of the second following month's sales. These and other data compiled by Demarest are summarized in the following table. January February March April May Direct-labor hours per unit 3.0 3.0 2.75 2.75 2.75 Wage per direct-labor hour $ 15.00 $ 15.00 $15.00 $ 17.00 $ 17.00 Estimated unit sales 11,000 13,000 9,000 10,000 10,000 Sales price per unit $ 50.00 $ 47.50 $47.50 $ 47.50 $ 47.50 Production overhead: Shipping and handling (per unit sold) $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 4.00 Purchasing, material handling, and inspection (per unit produced) $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 other production overhead (per direct-labor hour) 5 8.00 $ 8.00 $ 8.00 $ 8.00 $ 8.00 6 Answer is complete but not entirely correct. Sales (units) 13.000 9 9,000 9 33.000 9 Add: Ending inventory 12.000 0 20.000 9 20.000 9 Total needs 25.000 29.000 53,000 Less: Beginning inventory 15.700 0 12.000 0 15.700 9 Units to be produced 9,300 17.000 37.300 Direct-labor hours per unit Total hours of direct labor time needed {JD 8 0 27,900 46,750 107,650 Direct-labor costs: Wages $ 495.0009 :5 413.5000 $ 701.250 9 $ 1.614.750 a Pension contributions Workers' compensation insurance 34.650 9 24.750 9 29,295 a 20,925 9 49.088 9 35,063 6 .N .4 01 0 113,033 9 80,738 6 Employee medical insurance 99.000 9 83.700 0 140.250 9 322.950 9 Employer's social security 39.600 9 33,480 0 56.100 9 129,180 9 Total direct-labor cost $ 693,000 $ 585,900 $ 981,751 $ 2,260,651