Solution-Prepare a production budget and a direct labor

Prepare a production budget and a direct labor budget

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Reference no: EM132908480

Problem - 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
Estimated unit sales	12,000	14,000	13,000	11,000	11,000
Sales price per unit	$50.00	$47.50	$47.50	$47.50	$47.50
Direct labor hours per unit	2.0	2.0	1.5	1.5	1.5
Wage per direct labor hour	$8.00	$8.00	$8.00	$9.00	$9.00

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 17,600 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.

Required - Prepare a production budget and 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.

Reference no: EM132908480

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Prepare a production budget and a direct labor budget

Reference no: EM132908480

Reference no: EM132908480

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