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		11,000		11,600		8,900		8,500		8,400
Sales price per unit		$ 50.50		$ 48.40		$ 48.40		$ 48.40		$ 48.40
Direct labor hours per unit		2.2		2.2		1.7		1.7		1.7
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 19,120 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month’s sales, plus 70% 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, 2020For the Year Ending March 31, 2020March 31, 2020
		Jan		Feb		Mar		Total
Total Required UnitsBeginning Finished Goods UnitBeginning Direct MaterialsDirect Materials Per UnitDesired Ending Direct MaterialsRequired Production UnitsExpected Unit SalesDesired Ending Finished Goods UnitDirect Materials PurchasesTotal Materials Required
AddLess:    Direct Materials Per UnitBeginning Direct MaterialsTotal Required UnitsDesired Ending Finished Goods UnitDesired Ending Direct MaterialsRequired Production UnitsBeginning Finished Goods UnitExpected Unit SalesTotal Materials RequiredDirect Materials Purchases
Beginning Direct MaterialsBeginning Finished Goods UnitTotal Materials RequiredExpected Unit SalesRequired Production UnitsTotal Required UnitsDesired Ending Finished Goods UnitDirect Materials PurchasesDirect Materials Per UnitDesired Ending Direct Materials
AddLess:    Beginning Direct MaterialsTotal Materials RequiredDesired Ending Finished Goods UnitDirect Materials Per UnitRequired Production UnitsTotal Required UnitsDesired Ending Direct MaterialsExpected Unit SalesBeginning Finished Goods UnitDirect Materials Purchases
Desired Ending Direct MaterialsDirect Materials PurchasesExpected Unit SalesDirect Materials Per UnitBeginning Direct MaterialsBeginning Finished Goods UnitRequired Production UnitsDesired Ending Finished Goods UnitTotal Materials RequiredTotal Required Units

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   For the Quarter Ending March 31, 2020For the Year Ending March 31, 2020March 31, 2020
		Jan		Feb		Mar		Total
Direct Labor Cost Per HourBeginning Materials InventoryDirect Materials Per UnitTotal Materials RequiredTotal Direct Labor CostCost Per PoundDirect Materials PurchasesTotal Cost of Direct Materials PurchasesTotal Required Direct Labor HoursDirect Labor Time (Hours) Per UnitDesired Ending InventoryTotal Pounds Required for ProductionUnits to be Produced
Total Required Direct Labor HoursTotal Pounds Required for ProductionDirect Labor Cost Per HourDesired Ending InventoryTotal Cost of Direct Materials PurchasesTotal Direct Labor CostTotal Materials RequiredDirect Materials Per UnitDirect Materials PurchasesUnits to be ProducedCost Per PoundBeginning Materials InventoryDirect Labor Time (Hours) Per Unit
Direct Materials PurchasesUnits to be ProducedDirect Labor Cost Per HourDirect Labor Time (Hours) Per UnitDirect Materials Per UnitDesired Ending InventoryTotal Cost of Direct Materials PurchasesTotal Required Direct Labor HoursTotal Pounds Required for ProductionBeginning Materials InventoryCost Per PoundTotal Materials RequiredTotal Direct Labor Cost
Total Materials RequiredCost Per PoundUnits to be ProducedDesired Ending InventoryTotal Pounds Required for ProductionTotal Required Direct Labor HoursBeginning Materials InventoryTotal Cost of Direct Materials PurchasesDirect Materials PurchasesTotal Direct Labor CostDirect Materials Per UnitDirect Labor Cost Per HourDirect Labor Time (Hours) Per Unit		$		$		$
Desired Ending InventoryTotal Materials RequiredTotal Cost of Direct Materials PurchasesDirect Labor Cost Per HourCost Per PoundDirect Materials Per UnitTotal Direct Labor CostDirect Labor Time (Hours) Per UnitTotal Required Direct Labor HoursDirect Materials PurchasesBeginning Materials InventoryUnits to be ProducedTotal Pounds Required for Production		$		$		$		$

Answer 1

Answer:a)-

Lowell Company
Production Budget
Particulars	January	Febuary	March	Total
Budgeted Unit sales	11000	11600	8900	31500
ADD:- Closing stock
100 % following month unit sales+70% of second following month's sales	(11600*100%)+(8900*70%)=17830	(8900*100%)+(8500*70%)=14850	(8500*100%)+(8400*70%)=14380	47060
Less: Opening stock	19120	17830	14850	51800
Required production in units	9710	8620	8430	26760

b)-

Lowell Company
Direct Labor Budget
Particulars	January	Febuary	March	Total
Budgeted Production units (a)	9710	8620	8430	26760
Direct labor hours per unit (b)	2.2	2.2	1.7
Total direct labor hours (c=a*b)	21362	18964	14331	54657
Wage per direct labor hour (d)	$8	$8	$8
Total direct labor in $ (e=c*d)	170896	151712	114648	437256