Shibby Shades Incorporated 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 1.0 hour to 0.75 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 4.00 percent of direct- labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost. Shibby Shades Incorporated has a labor contract that calls for a wage increase to $21.00 per hour on April 1, 20x1. Management expects to have 23,600 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 60 percent of the second following month's sales. These and other data compiled by Demarest are summarized in the following table. Direct-labor hours per unit Wage per direct-labor hour Estimated unit sales January 1.0 $ 19.00 14,000 Sales price per unit $ 60.00 February 1.0. $ 19.00 16,000 $ 57.50 March 0.75 $ 19.00 12,000 April 0.75 $ 21.00 13,000 May 0.75 $ 57.50 $ 57.50 $ 21.00 $13,000 $ 57.50 Production overhead: Shipping and handling (per unit sold) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Purchasing, material handling, and inspection (per unit produced) $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 Other production overhead (per direct-labor hour) $ 5.00 $ 5.00 $5.00 $ 5.00 $ 5.00
Shibby Shades Incorporated 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 1.0 hour to 0.75 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 4.00 percent of direct- labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost. Shibby Shades Incorporated has a labor contract that calls for a wage increase to $21.00 per hour on April 1, 20x1. Management expects to have 23,600 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 60 percent of the second following month's sales. These and other data compiled by Demarest are summarized in the following table. Direct-labor hours per unit Wage per direct-labor hour Estimated unit sales January 1.0 $ 19.00 14,000 Sales price per unit $ 60.00 February 1.0. $ 19.00 16,000 $ 57.50 March 0.75 $ 19.00 12,000 April 0.75 $ 21.00 13,000 May 0.75 $ 57.50 $ 57.50 $ 21.00 $13,000 $ 57.50 Production overhead: Shipping and handling (per unit sold) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Purchasing, material handling, and inspection (per unit produced) $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 Other production overhead (per direct-labor hour) $ 5.00 $ 5.00 $5.00 $ 5.00 $ 5.00
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter7: The Master Budget And Flexible Budgeting
Section: Chapter Questions
Problem 8P: Preparing a performance report Use the flexible budget prepared in P7-6 for the 29,000-unit level of...
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Required information
PR 9-31 (Algo) Production and Direct-Labor Budgets; Activity-Based Overhead Budget (LO 9-3, 9-4, 9-5,
9-6)
[The following information applies to the questions displayed below.]
Shibby Shades Incorporated 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 1.0 hour to 0.75 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 4.00 percent of direct-
labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost.
Shibby Shades Incorporated has a labor contract that calls for a wage increase to $21.00 per hour on April 1, 20x1.
Management expects to have 23,600 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 60 percent of the second following month's sales.
These and other data compiled by Demarest are summarized in the following table.
Direct-labor hours per unit
May
0.75
$ 21.00
13,000
$ 57.50
Wage per direct-labor hour
Estimated unit sales
January
1.0
$ 19.00
14,000
Sales price per unit
$ 60.00
February
1.0
$ 19.00
16,000
$ 57.50
March
0.75
$ 19.00
12,000
$ 57.50
April
0.75
$ 21.00
13,000
$ 57.50
Production overhead:
Shipping and handling (per unit sold)
$ 1.00
$ 1.00
$ 1.00
$ 1.00
$ 1.00
Purchasing, material handling, and inspection (per unit
produced)
$ 2.00
$ 2.00
$ 2.00
$ 2.00
$ 2.00
Other production overhead (per direct-labor hour)
$ 5.00
$ 5.00
$ 5.00
$ 5.00
$ 5.00
PR 9-31 (Algo) Part 1: Prepare a production budget and a direct-labor budget...
Required:
1. Prepare a production budget and a direct-labor budget for Shibby Shades Incorporated by month and for the first quarter of 20x1.
Note: Round "Direct-labor hours per unit" to 2 decimal places.
SHIBBY SHADES INCORPORATED
Budget for Production and Direct Labor
For the First Quarter of 20x1
Month
Quarter
January
February
March
Sales (units)
14,000
16,000
12,000
42,000
Add: Ending inventory
25,600
19,200
20,800
65,600
Total needs
39,600
35,200
32,800
107,600
Less: Beginning inventory
23,600
25,600
19,200
23,600
Units to be produced
16,000
9,600
13,600
84,000
Direct-labor hours per unit
1.00
1.00
0.75
Total hours of direct labor time needed
16,000
9,600
10,200
35,800
Direct-labor costs:
Wages
Pension contributions
Workers' compensation insurance
Employee medical insurance
Employer's social security
Total direct-labor cost
$
0
$
0 $
0 $
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Transcribed Image Text:!
Required information
PR 9-31 (Algo) Production and Direct-Labor Budgets; Activity-Based Overhead Budget (LO 9-3, 9-4, 9-5,
9-6)
[The following information applies to the questions displayed below.]
Shibby Shades Incorporated 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 1.0 hour to 0.75 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 4.00 percent of direct-
labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost.
Shibby Shades Incorporated has a labor contract that calls for a wage increase to $21.00 per hour on April 1, 20x1.
Management expects to have 23,600 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 60 percent of the second following month's sales.
These and other data compiled by Demarest are summarized in the following table.
Direct-labor hours per unit
May
0.75
$ 21.00
13,000
$ 57.50
Wage per direct-labor hour
Estimated unit sales
January
1.0
$ 19.00
14,000
Sales price per unit
$ 60.00
February
1.0
$ 19.00
16,000
$ 57.50
March
0.75
$ 19.00
12,000
$ 57.50
April
0.75
$ 21.00
13,000
$ 57.50
Production overhead:
Shipping and handling (per unit sold)
$ 1.00
$ 1.00
$ 1.00
$ 1.00
$ 1.00
Purchasing, material handling, and inspection (per unit
produced)
$ 2.00
$ 2.00
$ 2.00
$ 2.00
$ 2.00
Other production overhead (per direct-labor hour)
$ 5.00
$ 5.00
$ 5.00
$ 5.00
$ 5.00
PR 9-31 (Algo) Part 1: Prepare a production budget and a direct-labor budget...
Required:
1. Prepare a production budget and a direct-labor budget for Shibby Shades Incorporated by month and for the first quarter of 20x1.
Note: Round "Direct-labor hours per unit" to 2 decimal places.
SHIBBY SHADES INCORPORATED
Budget for Production and Direct Labor
For the First Quarter of 20x1
Month
Quarter
January
February
March
Sales (units)
14,000
16,000
12,000
42,000
Add: Ending inventory
25,600
19,200
20,800
65,600
Total needs
39,600
35,200
32,800
107,600
Less: Beginning inventory
23,600
25,600
19,200
23,600
Units to be produced
16,000
9,600
13,600
84,000
Direct-labor hours per unit
1.00
1.00
0.75
Total hours of direct labor time needed
16,000
9,600
10,200
35,800
Direct-labor costs:
Wages
Pension contributions
Workers' compensation insurance
Employee medical insurance
Employer's social security
Total direct-labor cost
$
0
$
0 $
0 $
이
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