6.12 Production, labour, materials and sales budgets Bullen & Company makes and sells upmarket carry bags for laptop computers. John Crane, controller, is responsible for preparing Bullen's master budget and has assembled the following data for 2016. The direct labour rate includes wages, all employee-related benefits and the employer's share of payroll tax. Labour-saving machinery will be fully operational by March. Also, as of 1 March, the entity's enterprise agreement calls for an increase in direct labour wages that is included in the direct labour rate. Bullen expects to have 10 000 bags in inventory at 31 December 2015, and has a policy of carrying 50 per cent of the following month's projected sales in inventory. 2016 Estimated unit sales Sales price per unit Direct labour hours per unit Direct labour hourly rate Direct materials cost per unit January 20 000 $ 80 4.0 $ 15 $ 10 February 24 000 $ 80 4.0 $ 15 $ 10 March 16 000 $ 75 3.5 $ 16 $ 10 April 18000 $ 75 3.5 $ 16 $ 10 Required (a) Prepare the following budgets for Bullen & Company for the first quarter of 2016. Be sure to show supporting calculations: (i) production budget in units (ii) direct labour budget in hours (iii) direct materials budget (iv) sales budget. (b) Calculate the total budgeted contribution margin for Bullen & Company for the first quarter of 2016. Be sure to show supporting calculations. (c) Discuss at least three behavioural considerations in the profit- planning and budgeting process. (LO2)