Lowell Company makes and sells artistic frames for pictures. The controller is r
ID: 2522551 • Letter: L
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
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 17,140 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month’s sales, plus 60% of the second following month’s sales.
A) Prepare a production budget for Lowell Company by month and for the first quarter of the year.
B) Prepare a direct labor budget for Lowell company by month and for the first quarter of the year
January
February
March
April
May
Estimated unit sales 10,300 11,400 8,200 8,100 8,700 Sales price per unit $50.80 $48.20 $48.20 $48.20 $48.20 Direct labor hours per unit 2.1 2.1 1.7 1.7 1.7 Wage per direct labor hour $8.00 $8.00 $8.00 $9.00 $9.00Explanation / Answer
Answer a. LOWELL COMPANY Frame Production Budget Jan Feb Mar Total Sales In units 10,300 11,400 8,200 29,900 Add: Ending Inventory in units 16,320 13,060 13,320 13,320 Total Needs 26,620 24,460 21,520 43,220 Less: Beginning Inventory in uints (17,140) (16,320) (13,060) (17,140) Required Production in Units 9,480 8,140 8,460 26,080 Desired Ending Inventory Jan - 11,400 X 100% + 8,200 X 60% 16,320 Feb - 8,200 X 100% + 8,100 X 60% 13,060 Mar - 8,100 X 100% + 8,700 X 60% 13,320 Answer b. LOWELL COMPANY Budgeted Direct Labor Costs Jan Feb Mar Total Required Production in Units 9,480 8,140 8,460 26,080 Lab. Hour required per unit 2.10 2.10 1.70 Total Labor Hours Required 19,908 17,094 14,382 51,384 Lab. Rate per Hour 8 8 8 8 Budgeted Direct Labor Costs 159,264 136,752 115,056 411,072
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