Problem:
Donnegal Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2012.
|
January
|
February
|
March
|
April
|
May
|
|
Estimated unit sales
|
10,000
|
12,000
|
8,000
|
9,000
|
9,000
|
|
Sales price per unit
|
$50.00
|
$47.50
|
$47.50
|
$47.50
|
$47.50
|
|
Direct labor hours per unit
|
2
|
2
|
1.5
|
1.5
|
1.5
|
|
Wage per direct labor hour
|
$8.00
|
$8.00
|
$8.00
|
$9.00
|
$9.00
|
Donnegal 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.Donnegal expects to begin the year with 16,000 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 50% of the second following month's sales.
Instructions
Prepare a production budget and a direct labor budget for Donnegal Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours