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.

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.
(CMA-Canadaadapted)

Transcribed Image Text:

January February March April May 10,000 12,000 8,000 9,000 9,000 $50.00 $47.50 $47.0 $47.50 $47.50 1.5 Estimated unit sales Sales price per unit Direct labor hours per unit 2.0 2.0 1.5 1.5 Wage per direct labor hour $8.00 8.00 8.00 9.00 $9.00