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
Estimated unit sales		10,900		11,200		8,800		8,500		8,600
Sales price per unit		$50.40		$47.30		$47.30		$47.30		$47.30
Direct labor hours per unit		2.0		2.0		1.6		1.6		1.6
Wage per direct labor hour		$7.00		$7.00		$7.00		$8.00		$8.00

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, 2017March 31, 2017For the Year Ending March 31, 2017 For the Quarter Ending March 31, 2017March 31, 2017For the Year Ending March 31, 2017
		Jan		Feb		Mar		Total
Rate Per HourBeginning InventoryTotal Direct LaborDirect Materials PurchasesCost Per PoundBeginning Direct MaterialsDesired Ending Direct MaterialsTotal Cost of Direct Materials PurchasesProduction in UnitsDesired Ending InventorySales in UnitsTotal Materials RequiredDirect Labor Hours Per UnitTotal Hours NeededTotal Needs Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesProduction in UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal NeedsTotal Materials Required
Direct Materials PurchasesTotal NeedsDesired Ending Direct MaterialsTotal Direct LaborBeginning Direct MaterialsProduction in UnitsCost Per PoundSales in UnitsTotal Cost of Direct Materials PurchasesTotal Hours NeededDirect Labor Hours Per UnitDesired Ending InventoryRate Per HourBeginning InventoryTotal Materials Required Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesProduction in UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal NeedsTotal Materials Required
Total Materials RequiredTotal Cost of Direct Materials PurchasesDirect Labor Hours Per UnitSales in UnitsBeginning InventoryProduction in UnitsDesired Ending InventoryBeginning Direct MaterialsCost Per PoundRate Per HourDirect Materials PurchasesDesired Ending Direct MaterialsTotal Hours NeededTotal Direct LaborTotal Needs Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesProduction in UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal NeedsTotal Materials Required
Rate Per HourDirect Materials PurchasesTotal Materials RequiredBeginning Direct MaterialsSales in UnitsTotal Direct LaborDesired Ending InventoryBeginning InventoryDirect Labor Hours Per UnitDesired Ending Direct MaterialsTotal Hours NeededTotal Cost of Direct Materials PurchasesProduction in UnitsTotal NeedsCost Per Pound Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesProduction in UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal NeedsTotal Materials Required		$		$		$
Total Cost of Direct Materials PurchasesTotal Materials RequiredDirect Labor Hours Per UnitProduction in UnitsDirect Materials PurchasesBeginning Direct MaterialsRate Per HourDesired Ending Direct MaterialsBeginning InventoryCost Per PoundTotal NeedsTotal Direct LaborSales in UnitsTotal Hours NeededDesired Ending Inventory Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesProduction in UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal NeedsTotal Materials Required		$		$		$		$ Lowell has a labor contract that calls for a wage increase to $8.00 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 15,380 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. Part 1 Prepare a production budget for Lowell Company by month and for the first quarter of the year. LOWELL COMPANY Production Budget For the Year Ending March 31, 2017March 31, 2017For the Quarter Ending March 31, 2017 For the Quarter Ending March 31, 2017March 31, 2017For the Year Ending March 31, 2017 Jan Feb Mar Total Required Production UnitsTotal Hours NeededDesired Ending InventorySales in UnitsBeginning InventoryDirect Labor Hours Per UnitBeginning Direct MaterialsDirect Materials PurchasesTotal Materials RequiredRate Per HourDesired Ending Direct MaterialsTotal Direct LaborTotal NeedsCost Per PoundTotal Cost of Direct Materials Purchases Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesRequired Production UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal Materials RequiredTotal Needs AddLess AddLess: Sales in UnitsRate Per HourDesired Ending Direct MaterialsTotal Cost of Direct Materials PurchasesCost Per PoundBeginning InventoryDesired Ending InventoryTotal NeedsBeginning Direct MaterialsDirect Labor Hours Per UnitDirect Materials PurchasesRequired Production UnitsTotal Hours NeededTotal Direct LaborTotal Materials Required Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesRequired Production UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal Materials RequiredTotal Needs Cost Per PoundDesired Ending InventoryBeginning Direct MaterialsTotal Direct LaborDirect Materials PurchasesRate Per HourDirect Labor Hours Per UnitTotal Materials RequiredRequired Production UnitsTotal Hours NeededSales in UnitsBeginning InventoryTotal NeedsDesired Ending Direct MaterialsTotal Cost of Direct Materials Purchases Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesRequired Production UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal Materials RequiredTotal Needs AddLess AddLess: Beginning Direct MaterialsDesired Ending Direct MaterialsTotal Cost of Direct Materials PurchasesCost Per PoundRequired Production UnitsDirect Materials PurchasesDesired Ending InventoryTotal Direct LaborBeginning InventoryRate Per HourSales in UnitsTotal Hours NeededDirect Labor Hours Per UnitTotal NeedsTotal Materials Required Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesRequired Production UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal Materials RequiredTotal Needs Direct Materials PurchasesBeginning Direct MaterialsDirect Labor Hours Per UnitRate Per HourCost Per PoundTotal Materials RequiredRequired Production UnitsSales in UnitsTotal Direct LaborTotal NeedsBeginning InventoryTotal Cost of Direct Materials PurchasesDesired Ending Direct MaterialsDesired Ending InventoryTotal Hours Needed Beginning Direct MaterialsBeginning InventoryCost Per PoundDesired Ending Direct MaterialsDesired Ending InventoryDirect Labor Hours Per UnitDirect Materials PurchasesRequired Production UnitsRate Per HourSales in UnitsTotal Cost of Direct Materials PurchasesTotal Direct LaborTotal Hours NeededTotal Materials RequiredTotal Needs

Answer 1

Solution

LOWELL COMPANY
Production budget
	Jan	Feb	Mar	Total
Expected Unit Sales	10900	11200	8800	30900
Add: Desired Ending Finished Goods Unit	14720	12200	11940	11940
Total Required	25620	23400	20740	42840
Less : Beginning Finished Goods Unit	15380	14720	12200	15380
Required Production Units	10240	8680	8540	27460

.

LOWELL COMPANY
Direct labor budget
For the Quarter Ending March 31, 2017
	Jan	Feb	Mar	Total
Units to be Produced	10240	8680	8540	27460
Direct Labor Time (Hours) Per Unit	2	2	1.6
Total Required Direct Labor Hours	20480	17360	13664	51504
Direct Labor Cost Per Hour	$ 7	$ 7	$ 7	$ 7
Total Direct Labor Cost	$ 143,360	$ 121,520	$ 95,648	$ 360,528