Required information 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. 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 2.0 hours to 175 hours. Labor-related costs include pension contributions of $0.55 per hour, workers' compensation Insurance of $0.25 per hour, employee medical insurance of $1 per hour, and employer contributions to Social Security equal to 7.00 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 $12.00 per hour on April 1, 20x1. Management expects to have 28,800 frames on hand at December 3, 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. January February May 1.75 $10.00 20,000 $ 62.00 10.00 22,000 $59.50 March 1.75 10.00 10.000 59.50 ri 1.75 12.00 19.000 $59.50 12.00 19,000 $59.50 Direct-labor hours per unit Wage per direct labor hour Estimated unit Sales Sales priee per unit Production Overheads Shipping and handling (per unit sold) Purchasing material handling and inspection (per unit produced) Other production overhead (per direct-labor hour) 2.00 $ 2.00 52.00 52.00 52.00 $ 3.00 $ 3.00 3.00 3.00 3.00 $ 7.00 $ 7.00 7.00 7.00 Required information 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 18,000 Quarter 60,000 18,000 60,000 SPIFFY SHADES CORPORATION Budget for Production and Direct Labor For the First Quarter of 20x1 Month January February Sales (unit) 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 Direct-labor costs Wages Pension contributions Workers' compensation insurance Employee medical insurance 18,000 Employer's social security Total direct labor cost $ 0S 0S 0 $ Problem 9-31 Part 3 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 March Quarter