Accounting Question Exercise 23-10 Lowell Company makes and sells artistic frame
ID: 2735247 • Letter: A
Question
Accounting Question Exercise 23-10
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 Estimated unit sales 10, 000 11,000 8,000 8,000 8,000 Sales price per unit $50.00 $47.00 $47.00 $47.00 $47.00 Direct labor hours per unit 2.0 2.0 1.5 1.5 1.5 Wage per direct labor hour $7.00 $7.00 $7.00 $8.00 $8.00 Lowell has a labor contract that calls for a wage increase to $8.00 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1. Lowell expects to begin the year with 14,400 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 40% of the second following month's sales. Prepare a production budget for Lowell Company by month and for the first quarter of the year. Prepare a direct labor budget for Lowell Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours. (Round Direct labor hours per unit answers to 1 decimal place, e.g. 52.7.)Explanation / Answer
Answer (1).
Lowell Company
Production Budget
For the quarter ending March 31, 2017
Jan
Feb
March
Total
Sales in units
10000
11000
8000
29000
Add: Desired ending inventory
100% of following month sales
40% of second following month sale
11000
3200
(8000*40%)
8000
3200
(8000*40%)
8000
3200
(8000*40%)
36600
Total Needs
24200
22200
19200
65600
Less: Beginning inventory
14400
14200
11200
39800
Production units
9800
8000
8000
25800
Note: Beginning inventory of the month is closing inventory of previous month.
Answer ( 2).
Lowell Company
Direct Labor Budget
For the quarter ending March 31, 2017
Jan
Feb
March
Total
Production in units
9800
8000
8000
Direct labor hour per unit
2
2
1.5
Total labor hours
19600
16000
12000
Rate per hour
7
7
7
Total direct labor($)
137200
112000
84000
333200
Jan
Feb
March
Total
Sales in units
10000
11000
8000
29000
Add: Desired ending inventory
100% of following month sales
40% of second following month sale
11000
3200
(8000*40%)
8000
3200
(8000*40%)
8000
3200
(8000*40%)
36600
Total Needs
24200
22200
19200
65600
Less: Beginning inventory
14400
14200
11200
39800
Production units
9800
8000
8000
25800
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