Problem 9-32 Production and Direct-Labor Budgets, Activity Based overhead Budget (LO 9-3, 9-4, 9-5, 9-6) [The following information applies to the questions displayed below.j Shady Shades, Inc., manufactures artistic frames for sunglasses. Talia Demarest, controller, is responsible for preparing the company's master budget. In compiling the budget data for 20x1, Demarest has learned that new automated production equipment will be installed on March 1. This will reduce the direct labor per frame from 2.0 hour to 1.75 hours Labor-related costs include pension contributions of $1.55 per hour, workers' compensation insurance of $1.25 per hour, employee medical insurance of $5 per hour, and employer contributions to Social Security equal to 5.00 percent of direct labor wages. The cost of employee benefits paid by the Company on its employees is treated as a direct-labor cost. Shady Shades Inc., has a labor contract that calls for a wage increase to $16.00 per hour on April 1, 20x1. Management expects to have 21,800 frames on hand at December 31, 20x0, and has a policy of carrying an end-of-month inventory of 100 percent of the following month's sales plus 40 percent of the second following month's sales. These and other data compiled by Demarest are summarized in the following table. March Apri May January February Direct-labor hours per unit 2.0 2.0 1.75 1.75 1.75 16.00 14.00 14.00 14.00 16.00 age per direct labor hour 13,000 14,000 Estimated unit sales 15,000 17,000 14,000 63.50 63.50 63.50 63.50 66.00 Sales price per unit Production overhead: 2.00 2.00 2.00 2.00 2.00 Shipping and handling (per unit sold) Purchasing, material handling, 3.00 3.00 3.00 3.00 3.00 and inspection (per unit produced) Other production overhead 5.00 5.00 5.00 5.00 5.00 (per direct-labor hour)