Question

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 10,700 11,300 8,600 8,200 8,200 Sales price per unit $50.30 $48.10 $48.10 $48.10 $48.10 Direct labor hours per unit 2.4 2.4 1.5 1.5 1.5 Wage per direct labor hour $8.00 $8.00 $8.00 $9.00 $9.00 Lowell 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 18,610 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month’s sales, plus 70% of the second following month’s sales.

Prepare a production budget for Lowell Company by month and for the first quarter.

Prepare a direct labor budget for Lowell Company by month and for the quarter of the year. The direct labor budget should include direct labor hours.

Answer 1

Solution:

48 49 AR SK 50 51 53 54 55 56 57 Lowell company Production Budget January February 10700 11300 17320 14340 28020 25640 18610 17320 94108320 Estimated unit sales Add: Desired inventories, Ending Total Requiredments Less: Expected inventories, Beginning Production required Units March Quarter 8600 30600 13940 13940 22540 44540 14340 18610 820025930 58 59 60 61 62 65 Lowell company Direct labor Budget | January February 9410 8320 2.4 2.4 22584 19968 66 67 68 69 Production required Units *Direct labor hours per unit Total Direct labor hours * direct labor cost per hour Total direct labor cost March Quarter 820025930 1.5 12300 5 4852 180672 159744 1 10700451116 71 72 73 74 76 77 78 79 80 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 -253 (2) ) Sheet710 Sheet711 Sheet574 (5) Sheet665