January February March April May (a) Lowell Company makes and sells artistic fra
ID: 2518149 • Letter: J
Question
January
February
March
April
May
(a)
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 11,500 8,900 8,700 8,500 Sales price per unit $50.90 $48.30 $48.30 $48.30 $48.30 Direct labor hours per unit 2.2 2.2 1.5 1.5 1.5 Wage per direct labor hour $8.00 $8.00 $8.00 $9.00 $9.00Lowell has a labor contract that calls for a wage increase to $9.00 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 16,150 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
Answer a. LOWELL COMPANY Frame Production Budget Jan Feb Mar Total Sales In units 10,400 11,500 8,900 30,800 Add: Ending Inventory in units 15,950 13,250 12,950 12,950 Total Needs 26,350 24,750 21,850 43,750 Less: Beginning Inventory in uints (16,150) (15,950) (13,250) (16,150) Required Production in Units 10,200 8,800 8,600 27,600 Desired Ending Inventory Dec - 10,400 X 100% + 11,500 X 50% 16,150 Jan - 11,500 X 100% + 8,900 X 50% 15,950 Feb - 8,900 X 100% + 8,700 X 50% 13,250 Mar - 8,700 X 100% + 8,500 X 50% 12,950 Answer b. LOWELL COMPANY Budgeted Direct Labor Costs Jan Feb Mar Total Required Production in Units 10,200 8,800 8,600 27,600 Lab. Hour required per unit 2.20 2.20 1.50 0.40 Total Labor Hours Required 22,440 19,360 12,900 11,040 Lab. Rate per Hour 8 8 8 11 Budgeted Direct Labor Costs 179,520 154,880 103,200 121,440
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