Question

Prepare a production budget and a direct manufacturing labor cost budget for

PetersonPeterson

Company by month and for the first quarter of

20182018.

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.

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 values for the quarter. Finish by preparing the bottom portion of the schedule for the direct manufacturing labor by​ month, then quarter. ​(Enter the direct manufacturing​ labor-hours per unit to one decimal​ place, X.X. Do not round interim​ calculations, and then enter all amounts in the budget​ [other than the direct manufacturing​ labor-hours per​ unit] to the nearest whole​ number.)

In addition to​ wages, direct manufacturing​ labor-related costs include pension contributions of ​$0.50 per​ hour, worker's compensation insurance of ​$0.10 per​ hour, employee medical insurance of ​$0.30 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 Peterson on its direct manufacturing employees is treated as a direct manufacturing labor cost.

Peterson 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. Peterson expects to have 22 comma 500 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.

Peterson Company
Budget for Production and Direct Manufacturing Labor
For the Quarter Ended March 31, 2018
	January	February	March
Budgeted sales (units)
Add target ending finished goods inventory (units)
Total requirements (units)
Deduct beginning finished goods inventory (units)
Units to be produced
Direct manufacturing labor-hours per unit
Total hours of direct manufacturing labor time needed

	2018
	January	February	March	April	May
Estimated sales in units	14,000	18,000	9,000	10,000	10,000
Selling price	$55.00	$51.50	$51.50	$51.50	$51.50
Direct manufacturing labor-hours per unit	3.5	3.5	1.5	1.5	1.5
Wage per direct manufacturing labor-hour	$12.00	$12.00	$12.00	$11.00	$11.00

Answer 1

Solution