McGrath Company makes and sells artistic frames for pictures of$$ weddings, graduations, and other special events. Ron Kerry$,$ the$$ controller, is responsible for preparing McGrath$\text{'}$s master budget and has accumulated the following information for $2021$: In addition to$$ wages, direct manufacturing$$ labor$-$related costs include pension contributions of $$$$0\mathrm{.}50$ per$$ hour, worker's compensation insurance of $$$$0\mathrm{.}15$ per$$ hour, employee medical insurance of $$$$0\mathrm{.}30$ per$$ hour, and Social Security taxes. Assume that as of January$1,2021,$ the Social Security tax rates are$7\mathrm{.}5\%$ for employers and$7\mathrm{.}5\%$ for employees. The cost of employee benefits paid by McGrath on its direct manufacturing employees is treated as a direct manufacturing labor cost.

McGrath has a labor contract that calls for a wage increase to $ $13$ per hour on April$1,2021.$ New$$ labor$-$saving machinery has been installed and will be fully operational by March$1,2021.$ McGrath expects to have $23500$ frames on hand at December$31,2020,$ and it has a policy of carrying an$$ end$-$of$-$month inventory of$100\%$ of the following$$ month's sales plus$50\%$ of the second following$$ month's sales.

$1.$Prepare a production budget and a direct manufacturing labor cost budget for McGrath Company by month and for the first quarter of $2021.$ You may combine both budgets in one schedule. The direct manufacturing labor cost budget should include$$ labor$-$hours and show the details for each labor cost category.

$2.$What actions has the budget process prompted McGrath$\text{'}$s management to$$ take?

$3.$How might McGrath$\text{'}$s managers use the budget developed in requirement $1$ to better manage the$$ company?and show the details for each labor cost category.

whole number.$)$