Question

E6-29 (similar to) Question Help Alcott Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron Brandy, the controller, is responsible for preparing Alcott's master budget and has accumulated the following information for 2018 EE(Click the icon to view some of the financial information.) (Click the icon to view additional information.) More Info Read the requirements. Requirement 1. Prepare a production budget and a direct manufacturing labor cost budget for Alcott Company by month and for the first quarter of 2018. You may combine both budgets labor-hours and show the details for each labor cost category In addition to wages, direct manufacturing labor-related costs include pension contributions of $0.40 per hour, worker's compensation insurance of $0.15 per hour, employee medical insurance of $0.50 per hour, and Social Security taxes. Assume that as of January 1, 2018, the Social Security tax rates are 7.5% for employers and 7.5% for employees. The cost of employee benefits paid by Alcott on its direct manufacturing employees is treated as a direct manufacturing labor cost Start the schedule by preparing the production budget and calculating the total hours of direct manufacturing labor time needed for the three months in the quarter, then calculate the valu manufacturing labor by month, then quarter. (Enter the direct manufacturing labor-hours per unit to one decimal place, XX. Do not round interim calculations, and then enter all amounts whole number.) - X Data Table Alcott has a labor contract that calls for a wage increase to $11 per hour on April 1, 2018. New labor-saving machinery has been installed and will be fully operational by March 1, 2018. Alcott expects to have 22,000 frames on hand at December 31 2017, and it 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. 2018 January February March Аpril May Estimated sales in units 15,000 10,000 18,000 8,000 10,000 Requirements Print Done Selling price 52.00 $ $ 57.00 $ 52.00 $ 52.00 $ 52.00 Direct manufacturing labor-hours per unit 2.5 2.5 1.0 1.0 1.0 8.00 $ 11.00 $ Wage per direct manufacturing labor-hour 8.00 $ 8.00 $ 11.00 1. Prepare a production budget and a direct manufacturing labor cost budget for Alcott Company by month and for the first quarter of 2018. You may combine both budgets in one schedule. The direct manufacturing labor cost budget should include labor-hours and show the details for each labor cost category. Print Done 2. What actions has the budget process prompted Alcott's management to take? 3. How might Alcott's managers use the budget developed in requirement 1 to better manage the company? ? Enter any number in the edit fields and then click Check Answer Print Done 5 parts remaining Check Answer

Answer 1

Answer with working is given below

February March April 10,000 January 15,000 May 10,000 Sales units Closing stock- 100% of next month sales plus 50% of second following month sales 18,000 8,000 13,000 15,000 22,000 Production Budget (Units) and Direct Labor Cost Budget 1 February 24,000 13,000 37,000 22,000 Total March January 20,000 22,000 42,000 Sales units 16,000 15,000 31,000 13,000 18,000 60,000 Add : Closing stock 15,000 75,000 22,000 Less Opening Stock 22,000 20,000 Production budget 15,000 53,000 Direct labor hours per unit Total Direct labor hours Budget 2.50 2.50 1.00 50,000 37,500 18,000 105,500 Wage rate per direct labor hour Labor Cost Budget- category wise Base wages Pension Contribution - $0.40 per hour Worker compensation insurance - $0.15 per hour Medical Insurance - $0.50 per hour Social Security tax - 7.5% on Base wages Total Direct labor cost Budget $8 $8 $8 $300,000 $15,000 $5,625 $18,750 $22,500 $361,875 $400,000 $20,000 $7,500 $144,000 $844,000 $42,200 $15,825 $7,200 $2,700 $9,000 $63,300 $10,800 $173,700 $1,018,075 $25,000 $52,750 $30,000 $482,500 Since the manufacturing process was labor intensive and there was going to wage hike from April 2 management decided to automate the process and install the machine. Due to this labor hour required for manufacture has reduced from the month of March. Accordingly direct labor cost budget is lowering month on month. A Budget helps in achieving the strategic vision of the organisation. It is a plan of action set for achieving the objectives. All different departments need to come together and act in a co-ordinated way to get the job done A Budget also can be set as a goal for each department to achieve their objectives so that their performance can be evaluated end of the year and variable pay can be given based on performance. A Budget also helps in allocating the resources to different activities in an organisation in a judicious way