Exercise 9-10 Lowell Company makes and sells artistic frames for pictures. The c

Question

Exercise 9-10 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 8,400 10,200 50.20 2.0 $7.00 00 Estimated unit sales Sales price per unit Direct labor hours per unit Wage per direct labor hour 11,800 8 ,600 8,9 $47.10 $47.10 $47.10 $47.10 2.0 $7.00 $7.00 $8.00 $8.00 Lowell has a labor contract that calls for a wage increase to $8.00 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 18,460 frames on hand and has 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

Explanation / Answer

PRODUCTION BUDGET Jan Feb March QUARTER April May Budgeted Sales Units 10,200 11,800 8,600 30,600 8,900 8,400 Add: Desired Ending Finished inventory 17,820 14,830 14,780 14,780 Total Needs 28,020 26,630 23,380 45,380 Less: Beginning Finished Inventory 18,460 17,820 14,830 18,460 Required Production in units 9,560 8,810 8,550 26,920 LABOUR COST BUDGETS Jan Feb Mar Quarter Units to be produced 9,560 8,810 8,550 26,920 Labour required per unit 2 2 1.6 0.35 Labour hours 19120 17620 13680 50420 Labuor Rate per hour 7 7 7 7 Budgeted Labour cost in $ 133,840 123,340 95,760 352,940

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