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 2020.

		January		February		March		April		May
Estimated unit sales		10,000		11,000		8,000		8,000		8,000
Sales price per unit		$50.00		$47.00		$47.00		$47.00		$47.00
Direct labor hours per unit		2.0		2.0		1.5		1.5		1.5
Wage per direct labor hour		$7		$7		$7		$8		$8

Lowell has a labor contract that calls for a wage increase to $8 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 14,400 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.

Prepare a production budget for Lowell Company by month and for the first quarter of the year.

LOWELL COMPANY Production Budget                                                                       For the Quarter Ending March 31, 2020March 31, 2020For the Year Ending March 31, 2020
		Jan		Feb		Mar		Total
Beginning Finished Goods UnitDirect Materials Per UnitDirect Materials PurchasesExpected Unit SalesTotal Required UnitsTotal Materials RequiredBeginning Direct MaterialsDesired Ending Finished Goods UnitRequired Production UnitsDesired Ending Direct Materials
AddLess:                                                                       Beginning Direct MaterialsDesired Ending Direct MaterialsTotal Required UnitsDesired Ending Finished Goods UnitTotal Materials RequiredDirect Materials Per UnitExpected Unit SalesBeginning Finished Goods UnitRequired Production UnitsDirect Materials Purchases
Direct Materials PurchasesRequired Production UnitsExpected Unit SalesTotal Required UnitsBeginning Direct MaterialsDirect Materials Per UnitTotal Materials RequiredDesired Ending Direct MaterialsBeginning Finished Goods UnitDesired Ending Finished Goods Unit
AddLess:                                                                       Desired Ending Direct MaterialsDesired Ending Finished Goods UnitTotal Required UnitsDirect Materials PurchasesRequired Production UnitsTotal Materials RequiredBeginning Finished Goods UnitExpected Unit SalesDirect Materials Per UnitBeginning Direct Materials
Direct Materials PurchasesDesired Ending Finished Goods UnitBeginning Finished Goods UnitBeginning Direct MaterialsExpected Unit SalesTotal Required UnitsTotal Materials RequiredRequired Production UnitsDesired Ending Direct MaterialsDirect Materials Per Unit

  Prepare a direct labor budget for Lowell Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours. (Round Direct labor hours per unit answers to 1 decimal place, e.g. 52.7.)

LOWELL COMPANY Direct Labor Budget                                                                       March 31, 2020For the Quarter Ending March 31, 2020For the Year Ending March 31, 2020
		Jan		Feb		Mar		Total
Total Required Direct Labor HoursBeginning Materials InventoryDirect Materials Per UnitTotal Direct Labor CostUnits to be ProducedTotal Pounds Required for ProductionDesired Ending InventoryDirect Labor Time (Hours) Per UnitTotal Materials RequiredCost Per PoundDirect Materials PurchasesTotal Cost of Direct Materials PurchasesDirect Labor Cost Per Hour
Direct Materials PurchasesDesired Ending InventoryDirect Labor Time (Hours) Per UnitTotal Direct Labor CostTotal Required Direct Labor HoursDirect Materials Per UnitTotal Pounds Required for ProductionCost Per PoundUnits to be ProducedTotal Materials RequiredDirect Labor Cost Per HourTotal Cost of Direct Materials PurchasesBeginning Materials Inventory
Direct Materials Per UnitDirect Labor Cost Per HourBeginning Materials InventoryDirect Labor Time (Hours) Per UnitDirect Materials PurchasesTotal Direct Labor CostTotal Required Direct Labor HoursCost Per PoundTotal Pounds Required for ProductionUnits to be ProducedDesired Ending InventoryTotal Materials RequiredTotal Cost of Direct Materials Purchases
Desired Ending InventoryCost Per PoundTotal Required Direct Labor HoursTotal Direct Labor CostTotal Pounds Required for ProductionTotal Materials RequiredDirect Materials Per UnitDirect Labor Cost Per HourUnits to be ProducedTotal Cost of Direct Materials PurchasesBeginning Materials InventoryDirect Labor Time (Hours) Per UnitDirect Materials Purchases		$		$		$
Beginning Materials InventoryCost Per PoundDirect Labor Time (Hours) Per UnitUnits to be ProducedTotal Materials RequiredTotal Pounds Required for ProductionDesired Ending InventoryDirect Labor Cost Per HourTotal Direct Labor CostTotal Cost of Direct Materials PurchasesTotal Required Direct Labor HoursDirect Materials PurchasesDirect Materials Per Unit		$		$		$		$

  

Answer 1

Solution:

Lowell company
Production Budget
	January	February	March	Quarter
Estimated unit sales	10000	11000	8000	29000
Add: Desired inventories, Ending	14200	11200	11200	11200
Total Requiredments	24200	22200	19200	40200
Less: Expected inventories, Beginning	14400	14200	11200	14400
Production required Units	9800	8000	8000	25800
Lowell company
Direct labor Budget
	January	February	March	Quarter
Production required Units	9800	8000	8000	25800
*Direct labor hours per unit	2.0	2.0	1.5
Total Direct labor hours	19600	16000	12000	47600
*direct labor cost per hour	7	7	7
Total direct labor cost	137200	112000	84000	333200