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 $20$x$1,$ Demarest has learned that new automated production equipment will be installed on March $1.$ This will reduce the direct labor per frame from $1\mathrm{.}0$ hour to $0\mathrm{.}75$ hour.

Labor$-$related costs include pension contributions of $$0\mathrm{.}80$ per hour, workers$$ compensation insurance of $$0\mathrm{.}50$ per hour, employee medical insurance of $$2$ per hour, and employer contributions to Social Security equal to $8\mathrm{.}00$ 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 $$22\mathrm{.}00$ per hour on April $1,20$x$1.$ Management expects to have $21,800$ frames on hand at December $31,20$x$0,$ and has a policy of carrying an end$-$of$-$month inventory of $100$ percent of the following month$$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 March April May

Direct$-$labor hours per unit $1\mathrm{.}01\mathrm{.}00\mathrm{.}750\mathrm{.}750\mathrm{.}75$

Wage per direct$-$labor hour $ $20\mathrm{.}00$ $ $20\mathrm{.}00$ $ $20\mathrm{.}00$ $ $22\mathrm{.}00$ $ $22\mathrm{.}00$

Estimated unit sales $15,00017,00013,00014,00014,000$

Sales price per unit $ $52\mathrm{.}00$ $ $49\mathrm{.}50$ $ $49\mathrm{.}50$ $ $49\mathrm{.}50$ $ $49\mathrm{.}50$

Production overhead:

Shipping and handling $($per unit sold$)$ $ $4\mathrm{.}00$ $ $4\mathrm{.}00$ $ $4\mathrm{.}00$ $ $4\mathrm{.}00$ $ $4\mathrm{.}00$

Purchasing, material handling, and

inspection $($per unit produced$)$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$

Other production overhead $($per

direct$-$labor hour$)$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$ $ $5\mathrm{.}00$

Problem $9-31$ Part $1$

Required:

$1.$ Prepare a production budget and a direct$-$labor budget for Spiffy Shades Corporation by month and for the first quarter of $20$x$1.($Round "Direct$-$labor hours per unit" to $2$ decimal places.$)$