Choo-Foo has a labor contract that calls for a wage increase to $9.50 per hour o

Question

Choo-Foo has a labor contract that calls for a wage increase to $9.50 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1.

Choo-Foo expects to begin the year with 17,500 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 50% of the second following month's sales.

Instructions
Prepare a production budget and a direct labor budget for Choo-Foo Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours.(Round hours per unit and rate per hour to 2 decimal places, e.g. 10.50. Enter all amounts as positive amounts and subtract where necessary.)

AE9-9 Choo-Foo Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2011. Choo-Foo has a labor contract that calls for a wage increase to $9.50 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1. Choo-Foo expects to begin the year with 17,500 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 50% of the second following month's sales. Instructions Prepare a production budget and a direct labor budget for Choo-Foo Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours.(Round hours per unit and rate per hour to 2 decimal places, e.g. 10.50. Enter all amounts as positive amounts and subtract where necessary.)

Explanation / Answer

production budget: January February March Quarter Budgeted sales (units) 11,000 13,000 9,000 33,000 Add target ending finished goods inventorya (units) 17,500 13,500 13,500 13,500 Total requirements (units) 28,500 26,500 22,500 46,500 Deduct beginning finished goods inventory (units) 17,500 17,500 13,500 16,000 Units to be produced 11,000 9,000 9,000 30,500 direct labour budget Production Needed 11,000 9,000 9,000 30,500 Direct Labor Hours Per Unit 2.3 2.3 1.4 Total Hours Needed 25,300 20,700 12,600 58,600 Rate Per Hour 7.7 7.7 7.7 Total Direct Labor 194,810 159,390 97,020 451,220

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