Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the companys 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 4.0 hours to 3.75 hours. Labor-related costs include pension contributions of $0.80 per hour, workers compensation insurance of $0.50 per hour, employee medical insurance of $2 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 $14.00 per hour on April 1, 20x1. Management expects to have 25,300 frames on hand at December 31, 20x0, and has a policy of carrying an end-of-month inventory of 100 percent of the following months sales plus 30 percent of the second following months sales. These and other data compiled by Demarest are summarized in the following table.

	January			February			March			April			May
Direct-labor hours per unit		4.0			4.0			3.75			3.75			3.75
Wage per direct-labor hour	$	12.00		$	12.00		$	12.00		$	14.00		$	14.00
Estimated unit sales		19,000			21,000			17,000			18,000			18,000
Sales price per unit	$	56.00		$	53.50		$	53.50		$	53.50		$	53.50
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)	$	7.00		$	7.00		$	7.00		$	7.00		$	7.00

1. Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the first quarter of 20x1. Round 2 decimal places.

SPIFFY SHADES CORPORATION
Budget for Production and Direct Labor
For the First Quarter of 20x1
	Month
	January	February	March	Quarter
Sales (units)
Total needs	0	0	0	0
Units to be produced	0	0	0	0
Direct-labor hours per unit
Total hours of direct labor time needed	0	0	0	0
Direct-labor costs:
Wages
Pension contributions
Workers' compensation insurance
Employee medical insurance
Employer's social security
Total direct-labor cost	$0	$0	$0	$0

2. 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	March	Quarter
Shipping and handling
Purchasing, material handling, and inspection
Other overhead
Total production overhead	$0	$0	$0	$0