responsible for preparing Johnston's master budget and has accumulated the following Johnston Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron Bahar, the controller, information for 2010: (Click the icon to view some of the financial information.) (Click the icon to view additional information.) Read the requirements Requirement 1. Prepare a production budget and a direct manufacturing labor cost budget for Johnston Company by month and for the first quarter of 2018. You may combine both budgets in one schedule. The direct manufacturing labor cost budget should include labor-hours and show the details for each labor cost category. Start the schedule by preparing the production budget and calculating the total hours of direct manufacturing labor time needed for the three months in the quarter, then calculate the values for the quarter. Finish by preparing the bottom portion of the schedule f. for the direct manufacturing labor by month, then quarter. (Enter the direct manufacturing labor-hours per unit to one decimal place, X.X. Do not round interim calculations, and then enter all amounts in the budget (other than the direct manufacturing labor-hours per unit) to the nearest whole number.) Johnston Company March Budget for Production and Direct Manufacturing Labor For the Quarter Ended March 31, 2018 January February Budgeted sales (units) Add target ending finished goods inventory (units) Total requirements (units) Deduct beginning finished goods inventory (units) Units to be produced Direct manufacturing labor-hours per unit Total hours of direct manufacturing labor time needed x 1 - More info Data table 2018 March April May In addition to wages, direct manufacturing labor-related costs include pension contributions of $0.60 per hour, worker's compensation insurance of $0.10 per hour, employee medical insurance of $0.50 per hour, and Social Security taxes. Assume that as of January 1, 2018, the Social Security tax rates are 7.5% for employers and 7.5% for employees. The cost of employee benefits paid by Johnston on its direct manufacturing employees is treated as a direct manufacturing labor cost. January February 17,000 19,000 Estimated sales in units 8,000 11,000 11,000 $ 55.00 $ 51.50 $ 51.50 $ 51.50 $ 51.50 Selling price Direct manufacturing labor-hours per unit Wage per direct manufacturing labor-hour 3.5 3.5 2.0 2.0 2.0 $ 12.00 $ 12.00 $ 12.00 $ 14.00 $ 14.00 Johnston has a labor contract that calls for a wage increase to $14 per hour on April 1, 2018. New labor-saving machinery has been installed and will be fully operational by March 1, 2018. Johnston expects to have 23,000 frames on hand at December 31, 2017, and it has a policy of carrying an end-of-month inventory of 100% of the following month's sales plus 50% of the second following month's sales. Print Done Requirements 1. Prepare a production budget and a direct manufacturing labor cost budget for Johnston Company by month and for the first quarter of 2018. You may combine both budgets in one schedule. The direct manufacturing labor cost budget should include labor-hours and show the details for each labor cost category. 2. What actions has the budget process prompted Johnston's management to take? 3. How might Johnston's managers use the budget developed in requirement 1 to better manage the company