Budget for production and direct manufacturing labour. (CMA, adapted) The Roletter Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Bob Anderson, controller, is responsible for preparing Roletter’s master budget and has accumulated the following information for 2007:

2007 January February March April May Estimated sales in units 12,000 14,400 9,600 10,800 10,800 Selling price $64.80 $61.80 $61.80 $61.80 $61.80 Direct manufacturing labour-hours per unit 2.0 2.0 1.5 1.5 1.5 Wage per direct manufacturing labour-hour $12.00 $12.00 $12.00 $13.20 $13.20 Besides wages, direct manufacturing labour-related costs include pension contributions of $0.60 per hour, workers’ compensation insurance of $0.18 per hour, employee medical insurance of $0.48 per hour, and employment insurance. Assume that as ofJanuary 1, 2007, the employment insurance rates are 7.5% of wages for employers and 7.5% of wages for employees. The cost of employee benefits paid by Roletter for its employees is treated as a direct manufacturing labour cost.

Roletter has a labour contract that calls for a wage increase to $13.20 per hour on April 1, 2007. New labour-saving machinery has been installed and will be fully operational by March 1, 2007.

Roletter expects to have 19,200 frames on hand on December 31, 2006, and has a policy of carrying an end-of-month inventory of 100% ofthe following month’s sales plus 50% ofthe second following month’s sales.

Required Prepare a production budget and a direct manufacturing labour budget for the Roletter Company by month and for the first quarter of 2007. Both budgets may be combined in one schedule. The direct manufacturing labour budget should include labour-hours and show the detail for each labour cost category.