Question

Question 2 Carla Vista Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2020. January February March April May Estimated unit sales 10,500 11,200 8,200 8,800 9,000 Sales price per unit $50.30 $47.00 $47.00 $47.00 $47.00 Direct labor hours per unit 2.2 2.2 1.6 1.6 1.6 Wage per direct labor hour $8 $8 $8 $9 $9 Carla Vista has a labor contract that calls for a wage increase to $9 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1. Carla Vista expects to begin the year with 18,340 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. (a) Prepare a production budget for Carla Vista Company by month and for the first quarter of the year. (b) Prepare a direct labor budget for Carla Visa Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours.

Answer 1

Production Budget
	Jan	Feb	Mar	Apr	May
Estimated Sales Units	10,500	11,200	8,200	8,800	9,000
Add: Desired Ending Inventory	16,940	14,360	15,100
Total Required	27,440	25,560	23,300
Less: Beginning Inventory	18,340	16,940	14,360
Units to be produced	9,100	8,620	8,940
Direct Labor Budget
	Jan	Feb	Mar
Units to be produced	9,100	8,620	8,940
Direct Labor hours per unit	2.2	2.2	1.6
Total labor hours required	20,020	18,964	14,304
Rate per hour	8	8	8
Budgeted Direct Labor cost	160,160	151,712	114,432