January February March April May Prepare a production budget for Lowell Company
ID: 2475953 • Letter: J
Question
January
February
March
April
May
Prepare a production budget for Lowell Company by month and for the first quarter of the year.
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
Estimated unit sales 10,400 11,100 8,000 9,000 8,600 Sales price per unit $50.80 $47.90 $47.90 $47.90 $47.90 Direct labor hours per unit 2.3 2.3 1.6 1.6 1.6 Wage per direct labor hour $7.00 $7.00 $7.00 $8.00 $8.00Lowell 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 15,950 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.
Explanation / Answer
LOWELL COMPANY Production Budget Jan Feb Mar Total Sales 10400 11100 8000 29500 (+) Ending Inventory 15100 12500 13300 13300 Total Units required 25500 23600 21300 42800 (-)Beginning Inventory 15950 15100 12500 15950 Production Units 9550 8500 8800 26850 LOWELL COMPANY Direct Labour Budget Jan Feb Mar Total Production Units (in nos.) 9550 8500 8800 Direct Labour hours per unit 2.3 2.3 1.6 Total direct labour hours required 21965 19550 14080 Wage per direct labour hour $7 $7 $7 Production Units $1,53,755 $1,36,850 $98,560 $3,89,165
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