Req uired information Problem 9-31 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] Spiffy Shades Corporation 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 3.0 hours to 2.75 hours. Labor-related costs include pension contributions of $1.05 per hour, workers' compensation insurance of $0.75 per hour, employee medical insurance of $3 per hour, and employer contributions to Social Security equal to 8.00 percent of direct- Iabor wages. The cost of employee benets paid by the company on its employees is treated as a direct-labor cost. Spiffy Shades Corporation has a labor contract that calls for a wage increase to $17.00 per hour on April 1, 20x1. Management expects to have 14,900 frames on hand at December 31, 20x0, and has a policy of carrying an endofmonth inventory of 100 percent of the following month's sales plus 30 percent of the second following month's sales. These and other data compiled by Demarest are summarized in the following table. January February March April May Direct-labor hours per unit 3.0 3.0 2.75 2.75 2.75 Wage per direct-labor hour $ 15.00 $ 15.00 $15.00 $ 17.00 $ 17.00 Estimated unit sales 11,000 13,000 9,000 10,000 10,000 Sales price per unit $ 50.00 $ 47.50 $47.50 $ 47.50 $ 47.50 Production overhead: Shipping and handling (per unit sold) $ 4.00 $ 4.00 $ 4.00 $ 4.00 $ 4.00 Purchasing, material handling, and inspection (per unit produced) $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 other production overhead (per direct-labor hour) 5 8.00 $ 8.00 $ 8.00 $ 8.00 $ 8.00 Required: 1. Prepare a production budget and a direct-labor budget for Spiffy Shades Corporation by month and for the rst quarter of 20x1. (Round "Direct-labor hours per unit" to 2 decimal places.) 9 Answer is complete but not entirely correct. Sales (units) Add: Ending inventory 0 15.700 0 40,700 9 Total needs 73,700 Less: Beginning inventory 42.600 6 Units to be produced 11,800 31,100 Direct-labor hours per unit 3.00 0 Total hours of direct labor time needed 27,900 27,500 90,800 Direct-labor costs: Wages $ 531,000 0 $ 413.5000 $ 4125000 $ 1,362,000 0 95.409 661000 Total direct-labor cost $ 743,400 $ 585,900 $ 577,500