Raddington Inc. makes and sells chairs. The controller is responsible for preparing the master budget and has accumulated the following information for 2022: 

Raddington Inc. has a labour contract that calls for a wage increase to $20 per hour on April 1. It has installed new labour-saving machinery, which will be fully operational by March 1.

Raddington Inc. expects to begin the year with 24,000 chairs 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 next month’s sales.

Instructions 

a. Prepare a production budget and a direct labour budget for Raddington Inc. by month and for the first quarter of the year. The direct labour budget should include direct labour hours and show the detail for each direct labour cost category. 

b. For each item used in Raddington Inc.’s production budget and its direct labour budget, identify the other component(s) of the master budget (budget package) that would also use these data.

Transcribed Image Text:

Estimated unit sales Sales price per unit Direct labour hours per unit Wage per direct labour hour January 15,000 $85 2 $18 February 18,000 $75 2 $18 March 13,000 $75 1.5 $18 April 14,000 $75 1.5 $20 May 14,000 $75 1.5 $20