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(Solution Download) Shady Shades, Inc., manufactures artistic frames for sunglasses. Talia Demarest, controller, is resp


 

 

 

 

 

 

 

Shady Shades, Inc., manufactures artistic frames for sunglasses.

 

Talia Demarest, controller, is responsible for preparing the

 

companyAc??cs 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 hours.

 

 

 

 

 

 

 

 

 

     Labor-related costs include

 

pension contributions of $0.50 per hour, workersAc??c compensation

 

insurance of $0.20 per hour, employee medical insurance of $0.80

 

per hour, and employer contributions to Social Security equal to 7

 

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 $18.00 per hour on April 1, 20x1. Management expects to

 

have 32,000 frames on hand at December 31, 20x0, and has a policy

 

of carrying an end-of-month inventory of 100 percent of the

 

following monthAc??cs sales plus 50 percent of the second following

 

monthAc??cs sales.

 

 

 

 

 

 

 

 

 

     These and other data compiled by

 

Demarest are summarized in the following table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January

 

 

February

 

 

March

 

 

April

 

 

May

 

 

  Direct-labor hours per unit

 

 

1.0

 

 

1.0

 

 

0.75

 

 

0.75

 

 

0.75

 

 

  Wage per direct-labor hour

 

 

$

 

 

16.00

 

 

$

 

 

16.00

 

 

$

 

 

16.00

 

 

$

 

 

18.00

 

 

$

 

 

18.00

 

 

  Estimated unit sales

 

 

20,000

 

 

24,000

 

 

16,000

 

 

18,000

 

 

18,000

 

 

  Sales price per unit

 

 

$

 

 

50.00

 

 

$

 

 

47.50

 

 

$

 

 

47.50

 

 

$

 

 

47.50

 

 

$

 

 

47.50

 

 

  Production overhead:

 

 

     Shipping and handling (per unit

 

sold)

 

 

$

 

 

3.00

 

 

$

 

 

3.00

 

 

$

 

 

3.00

 

 

$

 

 

3.00

 

 

$

 

 

3.00

 

 

  Purchasing, material handling,

 

 

     and inspection (per unit

 

produced)

 

 

$

 

 

4.50

 

 

$

 

 

4.50

 

 

$

 

 

4.50

 

 

$

 

 

4.50

 

 

$

 

 

4.50

 

 

  Other production overhead

 

 

     (per direct-labor hour)

 

 

$

 

 

10.50

 

 

$

 

 

10.50

 

 

$

 

 

10.50

 

 

$

 

 

10.50

 

 

$

 

 

10.50

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                              

 

SHASY SHADES, INC.

 

 

 

                                            

 

BUDGET FOR PRODUCTION AND DIRECT LABOR

 

 

 

                                                   

 

FOR THE FIRST QUARTER OF 20X1

 

 

MONTH

 

 

JANURARY

 

 

FEBURARY

 

 

MARCH

 

 

QUARTER

 

 

SALES (UNITS)

 

 

ADD: ENDING INVENTORY

 

 

TOTAL NEEDS

 

 

LESS: BEGINNING INVENTORY

 

 

UNITS TO BE PRODUCED

 

 

DIRECT-LABOR HOURS PER UNIT

 

 

TOTAL HOURS OF DIRECT LABOR TIME NEEDED

 

 

DIRECT-LABOR COSTS:

 

 

WAGES

 

 

PENSION CONTRIBUTIONS

 

 

WORKERSAc??c COMPENSATION INSURANCE

 

 

EMPLOYEE MEDICAL INSURANCE

 

 

EMPLOYERAc??cS SOCIAL SECURITY

 

 

TOTAL DIRECT-LABOR COST

 

 

2. Prepare a production-overhead budget for each month and for

 

the first quarter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                               

 

SHADY SHADES, INC

 

 

 

                                                     

 

PRODUCTION OVERHEAD BUDGET

 

 

 

                                                    

 

FOR THE FIRST QUARTER OF 20X1

 

 

 

                                   

 

MONTH

 

 

JANURARY

 

 

FEBURARY

 

 

MARCH

 

 

QUARTER

 

 

SHIPPING AND HANDLING

 

 

PURCHASING, MATERIAL HANDLING, AND INSPECTION

 

 

OTHER OVERHEAD

 

 

TOTAL PRODUCTION OVEHEAD

 

 


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