Question

In: Accounting

Shady Shades, Inc., manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...

Shady Shades, Inc., 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 3.0 hour to 2.75 hours.

     Labor-related costs include pension contributions of $.80 per hour, workers' compensation insurance of $.50 per hour, employee medical insurance of $2 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. Shady Shades, Inc., has a labor contract that calls for a wage increase to $16.00 per hour on April 1, 20x1. Management expects to have 19,000 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 50 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 3.0 3.0 2.75 2.75 2.75
  Wage per direct-labor hour $ 14.00 $ 14.00 $ 14.00 $ 16.00 $ 16.00
  Estimated unit sales 12,000 14,000 10,000 11,000 11,000
  Sales price per unit $ 64.00 $ 61.50 $ 61.50 $ 61.50 $ 61.50
  Production overhead:
     Shipping and handling (per unit sold) $ 6.00 $ 6.00 $ 6.00 $ 6.00 $ 6.00
     Purchasing, material handling,
   and inspection (per unit produced) $ 7.00 $ 7.00 $ 7.00 $ 7.00 $ 7.00
  Other production overhead
     (per direct-labor hour) $ 6.00 $ 6.00 $ 6.00 $ 6.00 $ 6.00
1.

Prepare a production budget and a direct-labor budget for Shady Shades, Inc., by month and in total for the first quarter of 20x1.

Need help in calculating the ending inventory in the production budget

      

       

      

Solutions

Expert Solution

1
Jan Feb Mar Apr May 1st quarter
Sales in units 12000 14000 10000 11000 11000 36000
(14000*100%)+(10000*50%) 10000+(11000*50%) 11000+(11000*50%) 11000+(36000*50%) 36000
Add desired ending inventory of finished goods 19000 15500 16500 29000 36000 16500
Total units required 31000 29500 26500 40000 47000 52500
Less expected beginning inventory of finished goods 19000 19000 15500 16500 29000 19000
Units to be produced* 12000 10500 11000 23500 18000 33500
Direct-labor hours per unit 3 3 2.75 2.75 2.75
Direct-labor hours required for production 36000 31500 30250 64625 49500 97750
Wages per direct-labor hour 14 14 14 16 16
Other labor-related costs
Pensions 0.8 0.8 0.8 0.8 0.8
Workers' compensation 0.5 0.5 0.5 0.5 0.5
Medical insurance 2 2 2 2 2
Social Security 0.98 0.98 0.98 1.12 1.12
Total Labor-related costs 18.28 4.28 4.28 4.42 4.42
Wages earned during quarter 658080 134820 129470 285642.5 218790 922370

Related Solutions

Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...
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 4.0 hours to 3.75 hours. Labor-related costs include pension contributions of $1.05 per hour, workers’ compensation insurance of $0.75 per hour, employee medical insurance of $3 per hour, and employer contributions...
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...
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 4.0 hours to 3.75 hours. Labor-related costs include pension contributions of $1.05 per hour, workers’ compensation insurance of $0.75 per hour, employee medical insurance of $3 per hour, and employer contributions...
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...
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 4.0 hours to 3.75 hours. Labor-related costs include pension contributions of $1.05 per hour, workers’ compensation insurance of $0.75 per hour, employee medical insurance of $3 per hour, and employer contributions...
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...
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 2.0 hours to 1.75 hours. Labor-related costs include pension contributions of $1.30 per hour, workers’ compensation insurance of $1.00 per hour, employee medical insurance of $4 per hour, and employer contributions...
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...
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 2.0 hours to 1.75 hours. Labor-related costs include pension contributions of $1.30 per hour, workers’ compensation insurance of $1.00 per hour, employee medical insurance of $4 per hour, and employer contributions...
Spiffy Shades Corporation manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the...
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 hour to 0.75 hour. Labor-related costs include pension contributions of $0.50 per hour, workers’ compensation insurance of $0.20 per hour, employee medical insurance of $0.80 per hour, and employer contributions...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2020. January February March April May Estimated unit sales 10,300 11,600 9,000 8,300 8,000 Sales price per unit $50.30 $48.70 $48.70 $48.70 $48.70 Direct labor hours per unit 2.3 2.3 1.6 1.6 1.6 Wage per direct labor hour $8 $8 $8 $9 $9 Lowell has a labor contract that calls for a wage increase to...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2017. January February March April May Estimated unit sales 10,700 11,000 9,000 8,700 8,900 Sales price per unit $50.60 $47.90 $47.90 $47.90 $47.90 Direct labor hours per unit 2.1 2.1 1.5 1.5 1.5 Wage per direct labor hour $7.00 $7.00 $7.00 $8.00 $8.00 Lowell has a labor contract that calls for a wage increase to...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2017. January February March April May Estimated unit sales 12,000 14,000 13,000 11,000 11,000 Sales price per unit $50.00 $47.50 $47.50 $47.50 $47.50 Direct labor hours per unit 2.0 2.0 1.5 1.5 1.5 Wage per direct labor hour $8.00 $8.00 $8.00 $9.00 $9.00 Lowell has a labor contract that calls for a wage increase to...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the...
Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2017. January February March April May Estimated unit sales 10,300 11,400 8,200 8,100 8,700 Sales price per unit $50.80 $48.20 $48.20 $48.20 $48.20 Direct labor hours per unit 2.1 2.1 1.7 1.7 1.7 Wage per direct labor hour $8.00 $8.00 $8.00 $9.00 $9.00 Lowell has a labor contract that calls for a wage increase to...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT