Question

Exercise 21-10 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 11,300 8,600 8,200 8,200 Sales price per unit $50.30 $48.10 $48.10 $48.10 $48.10 Direct labor hours per unit 2.4 2.4 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 $9.00 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1. Lowell expects to begin the year with 18,610 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month’s sales, plus 70% of the second following month’s sales. Prepare a production budget for Lowell Company by month and for the first quarter of the year. LOWELL COMPANY Production Budget Jan Feb Mar Total : : LINK TO TEXT LINK TO TEXT Prepare a direct labor budget for Lowell Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours. (Round Direct labor hours per unit answers to 1 decimal place, e.g. 52.7.) LOWELL COMPANY Direct Labor Budget Jan Feb Mar Total $ $ $ $ $ $ $

Answer 1

Clark Company
Budget for Production and Direct Manufacturing Labor
for the Quarter Ended March 31, 2018
	January	February	March	Quarter
Budgeted sales (units)	10,700	11,300	8,600	30,600
Add target ending finished goods
inventory (units)(Note a)	17,320	14,340	13,940	13,940
Total requirements (units)	28,020	25,640	22,540	44,540
Deduct beginning finished goods
inventory (units)	18,610	17,320	14,340	18,610
Units to be produced	9,410	8,320	8,200	25,930
Direct Labor budget
	January	February	March	Quarter
Production in units	9,410	8,320	8,200	25,930
Direct labor hours per unit	2.40	2.40	1.50
Total hours of direct manufacturing
labor time needed	22,584	19,968	12,300	54,852
rate per hour	$                                            8.00	$                                      8.00	$                                      8.00
total direct labor	$                                     180,672	$                               159,744	$                                  98,400	$                 438,816
Note a
ending inventory
January=11300+7000*70%	17320
Feb=8600+8200*70%	14340
March=8200+8200*70%	13940