Required information The following information applies to the questions displaye

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Required information The following information applies to the questions displayed below.] Spiffy Shades Corporation 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 automatecd 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 $0.80 per hour, workers' compensation insurance of $0.50 per hour, employee medical insurance of $2 per hour, and employer contributions to Social Security equal to 5.00 percent of direct- labor wages. The cost of employee benefits paid by the company on its employees is treated as a direct-labor cost. Spiffy Shades Corporation has a labor contract that calls for a wage increase to $21.00 per hour on April 1, 20x1. Management expects to have 24,000 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 30 percent of the second following month's sales. These and other data compiled by Demarest are summarized in the following table April 0.75 anuary February March Ma Direct-labor hours per unit Wage per direct-labor hour Estimated unit sales Sales price per unit Production overhead: 1.0 1.0 0.75 0.75 $ 19.00 19.00 19.00 21.00 21.00 17,000 $ 60.00 57.5057.50 $ 57.50 57.50 18,000 20,000 16,000 17,000 $ 2.00 2.00 2.00 Shipping and handling (per unit sold) Purchasing, material handling, and inspection 2.00 2.00 (per unit produced) $ 3.00 3.00 3.00 3.00 3.00 $ 8.00 8.00 8.00 8.00 8.00 Other production overhead (per direct-labor hour) . Prepare a production overhead budget for each month and for the first quarten SPIFFY SHADES CORPORATION Production Overhead Budget For the First Quarter of 20x1 Month JanuaryFebrua March Quarter Shipping and handling Purchasing, material handling, and inspection Other overhead Total production overhead

Explanation / Answer

PRODUCTION OVERHEADS BUDGET JAN FEB MARCH QUARTERR Shipping and handling cost (@2 per unit sold) 36000 40000 32000 108000 Purchasing Material handling and inspection 56400 48900 51000 156300 Other overheads 150400 130400 136000 416800 Total production overheads 242800 219300 219000 681100 Production Budget: Jan Feb March April may Estimated Sales units 18000 20000 16000 17000 17000 Add: Desired endin inventory 100% of next months sales 20000 16000 17000 17000 30% of second following month 4800 5100 5100 Total Desired inventory ending 24800 21100 22100 Total needs 42800 41100 38100 Less: beginnig inventory 24000 24800 21100 Production units 18800 16300 17000 Purchasing material cost (@ 3 per unit produced) 56400 48900 51000 labour hours required for production 18800 16300 17000 (@1 hour per unit produced) Other Production overheads 150400 130400 136000 (@ $8 per labour hour)

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