Spiffy Shades Corporation: Prepare a production budget....

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 20Ã?-1, 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 hour.

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 to Social Security equal to 8.00 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 $17.00 per hour on April 1, 20Ã?-1. Management expects to have 27,400 frames on hand at December 31, 20Ã?-0, and has a policy of carrying an end-of-month inventory of 100 percent of the following monthâ??s sales plus 40 percent of the second following monthâ??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 $ 15.00 $ 15.00 $ 15.00 $ 17.00 $ 17.00
Estimated unit sales 19,000 21,000 17,000 18,000 18,000
Sales price per unit $ 66.00 $ 63.50 $ 63.50 $ 63.50 $ 63.50
Manufacturing overhead:
Shipping and handling
(per unit sold) $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00
Purchasing, material handling,
and inspection
(per unit produced) $ 6.00 $ 6.00 $ 6.00 $ 6.00 $ 6.00
Other manufacturing overhead
(per direct-labor hour) $ 9.00 $ 9.00 $ 9.00 $ 9.00 $ 9.00

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1. Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the first quarter of 20Ã?-1. (Round your intermediate calculations and final answers to the nearest whole dollar amount. Input all amounts as positive values.

SPIFFY SHADES CORPORATION
BUDGET FOR PRODUCTION AND DIRECT LABOR
FOR THE FIRST QUARTER OF 20Ã?-1
Month

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January February March Quarter
Sales (units) ? ? ? ?
DeductAdd : Ending inventory ? ? ? ?
_______________________________________

Total needs ? ? ? ?
Add/Deduct ??
: Beginning inventory ? ? ? ?
________________________________________
Units to be produced ? ? ? ?
Direct-labor hours per unit Ã?- Ã?- Ã?-

Total hours of direct labor time needed __________________________

Direct-labor costs:
Wages $ $ $ $
Pension contributions
Workers' compensation insurance
Employee medical insurance
Employer's social security

Total direct-labor cost $ $ $ $

3. Prepare a manufacturing overhead budget for each month and for the first quarter.
SPIFFY SHADES CORPORATION
MANUFACTURING OVERHEAD BUDGET
FOR THE FIRST QUARTER OF 20Ã?-1

Month

January February March Quarter
Shipping and handling $ $ $ $
Purchasing, material handling
and inspection
Other overhead

Total manufacturing overhead $ $ $ $