Question

Company makes and sells artistic frames for pictures of​ weddings, graduations, and other special events. Ron

HartHart​,

the​ controller, is responsible for preparing

MahoneyMahoney​'s

master budget and has accumulated the following information for

20182018​:

1.	Prepare a production budget and a direct manufacturing labor cost budget for MahoneyMahoney 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.
2.	What actions has the budget process prompted MahoneyMahoney​'s management to​take?
3.	How might MahoneyMahoney​'s managers use the budget developed in requirement 1 to better manage the​ company?

2018

January

February

March

April

May

Estimated sales in units

10,000

16,000

7,000

8,000

8,000

Selling price

$58.00

$50.50

$50.50

$50.50

$50.50

Direct manufacturing labor-hours per unit

2.5

2.5

2.0

2.0

2.0

Wage per direct manufacturing labor-hour

$10.00

$10.00

$10.00

$14.00

$14.00

Requirement 1. Prepare a production budget and a direct manufacturing labor cost budget for

MahoneyMahoney

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.)

Mahoney 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

Quarter

Direct manufacturing labor costs:
Wages
Pension contributions
Workers' compensation insurance
Employee medical insurance
Social Security tax (employer's share)
Total direct manufacturing labor costs

Requirement 2. What actions has the budget process prompted

MahoneyMahoney​'s

management to​ take? ​(Select all that​ apply.)

MahoneyMahoney​'s

management would look for ways to

Requirement 3. How might

MahoneyMahoney​'s

managers use the budget developed in requirement 1 to better manage the​ company?

MahoneyMahoney​'s

management should work with employees to

▼

decrease labor productivity.

increase inventory levels.

increase labor productivty.

reduce the social security tax rate.

In addition to​ wages, direct manufacturing​ labor-related costs include pension contributions of

​$0.500.50

per​ hour, worker's compensation insurance of

​$0.100.10

per​hour, employee medical insurance of

​$0.300.30

per​ hour, and Social Security taxes. Assume that as of January​ 1,

20182018​,

the Social Security tax rates are​ 7.5% for employers and​ 7.5% for employees. The cost of employee benefits paid by

MahoneyMahoney

on its direct manufacturing employees is treated as a direct manufacturing labor cost.

MahoneyMahoney

has a labor contract that calls for a wage increase to

$ 14$14

per hour on April​ 1,

20182018.

New​ labor-saving machinery has been installed and will be fully operational by March​ 1,

20182018.

MahoneyMahoney

expects to have

19 comma 50019,500

frames on hand at December​ 31,

20172017​,

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.

Answer 1

Mahoney Company
Budget for Production and Direct Manufacturing Labor
For the Quarter Ended March 31, 2018					working
	January	February	March	Qtr	April	May
Budgeted sales (units)	10000	16000	7000	33000	8000	9000
Add target ending finished goods inventory (units)	19500	11000	12500	12500
100% of following month and 50% of second following month	(16000*100%)+(50%*7000)
Total requirements (units)	29500	27000	19500	45500
Deduct beginning finished goods inventory (units)	18000	19500	11000	18000
	(10000*100%)+(16000*50%)
Units to be produced	11500	7500	8500	27500
Direct manufacturing labor-hours per unit	2.5	2.5	2
Total hours of direct manufacturing labor time needed	28750	18750	17000	64500
Direct manufacturing labor costs:
Wages W (64500*$10)	645000
Pension contributions (64500*.5)	32250
Workers' compensation insurance (64500*.1)	6450
Employee medical insurance (64500*.3)	19350
Social Security tax (employer's share)	48375
Total direct manufacturing labor costs	751425
Req 2 Options not provided
Req 3
increase labor productivty.
If any doubt please comment