Question
Wickham Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron Hart, the controller, is responsible for preparing Wickham's
Wickham
Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron
Hart,
the controller, is responsible for preparing
Wickham's
master budget and has accumulated the following information for
2021
Data table
2021 | |||||
January | February | March | April | May | |
Estimated sales in units | 15,000 | 18,000 | 9,000 | 12,000 | 12,000 |
Selling price | $55.00 | $50.50 | $50.50 | $50.50 | $50.50 |
Direct manufacturing labor-hours per unit | 3.5 | 3.5 | 2.0 | 2.0 | 2.0 |
Wage per direct manufacturing labor-hour | $10.00 | $10.00 | $10.00 | $12.00 | $12.00 |
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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
$0.30
per hour, and Social Security taxes. Assume that as of January 1,
2021,
the Social Security tax rates are 7.5% for employers and 7.5% for employees. The cost of employee benefits paid by
Wickham
on its direct manufacturing employees is treated as a direct manufacturing labor cost.
Wickham
has a labor contract that calls for a wage increase to
$12
per hour on April 1,
2021.
New labor-saving machinery has been installed and will be fully operational by March 1,
2021.
Wickham
expects to have
22,500
frames on hand at December 31,
2020,
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.
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