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 1.0 hour to 0.75 hour.

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 $21.00 per hour on April 1, 20x1. Management expects to have 17,200 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 60 percent of the second following month's sales.

These and other data compiled by Demarest are summarized in the following table.

Direct-labor ours per unit

Jan 1.0 Feb 1.0 Mar 0.75 Apr 0.75 May 0.75

Wage per direct labor hour

Jan $19 Feb 19 Mar 19 Apr 21 May 21

Estimated unit sales

Jan 10,000 Feb 12,000 Mar 8,000

Apr 9,000 May 9,000

Sales price per unit

Jan $54.00 Feb $51.50 Mar $51.50

Apr $51.50 May $51.50

Production overhead:

Shipping and handling (per unit sold)

Jan $ 3.00 Feb $3.00 Mar $3.00

Apr $3.00 May $3.00

Purchasing, material handling, and

inspection (per unit produced)

Jan $4.00 Feb $4.00 Mar $4.00

Apr $4.00 May $4.00

Other production overhead (per

direct-labor hour)

Jan $9.00 Feb $9.00 Mar $9.00

Apr $9.00 May $9.00

Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the first quarter of 20x1.