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 2014.
|
|
January |
|
February |
|
March |
|
April |
|
May |
| Estimated unit sales |
|
10,300 |
|
11,900 |
|
8,900 |
|
8,900 |
|
8,200 |
| Sales price per unit |
|
$50.2 |
|
$47.5 |
|
$47.5 |
|
$47.5 |
|
$47.5 |
| Direct labor hours per unit |
|
2.3 |
|
2.3 |
|
1.6 |
|
1.6 |
|
1.6 |
| Wage per direct labor hour |
|
$8 |
|
$8 |
|
$8 |
|
$9 |
|
$9 |
Donnegal has a labor contract that calls for a wage increase to $9 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 15,060 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.
(a) Prepare a production budget for Donnegal Company by month and for the first quarter of the year.
(b) Prepare 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.