Question

Exercise 9-10 (Part Level Submission)

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 2020.

		January		February		March		April		May
Estimated unit sales		10,000		11,900		8,600		8,700		8,300
Sales price per unit		$50.50		$48.60		$48.60		$48.60		$48.60
Direct labor hours per unit		2.4		2.4		1.5		1.5		1.5
Wage per direct labor hour		$8		$8		$8		$9		$9

Lowell 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.

Lowell expects to begin the year with 14,760 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month’s sales, plus 40% of the second following month’s sales.

Answer 1

Answer:-a)-

Lowell Company
Production Budget (First Quarter)
Particulars	January	February	March	Quarter
Budgeted Unit sales	10000	11900	8600	30500
ADD:- Closing stock
100 % following month unit sales+40 % of the second following month's sales	11900+(8600*40%)=15340	8600+(8700*40%)=12080	8700+(8300*40%)=12020	39440
Less: Opening stock	14760	15340	12080	42180
Required production in units	10580	8640	8540	27760

b)-

Lowell Company
Direct Labor Budget (First Quarter)
Particulars	January	February	March	Quarter
Productions in units (a)	10580	8640	8540	27760
Direct labour hours per unit (b)	2.4	2.4	1.5
Total hours required (c=a*b)	25392	20736	12810	58938
Rate per hour (d) $	8	8	8
Total direct labor (e=c*d)	203136	165888	102480	471504