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 |
10,400 |
11,100 |
8,000 |
9,000 |
8,600 |
| Sales price per unit |
$50.80 |
$47.90 |
$47.90 |
$47.90 |
$47.90 |
| Direct labor hours per unit |
2.3 |
2.3 |
1.6 |
1.6 |
1.6 |
| Wage per direct labor hour |
$7.00 |
$7.00 |
$7.00 |
$8.00 |
$8.00 |
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 15,950 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.