Peterson Company makes and sells artistic picture frames for special events such as weddings and graduations. BobAnderson, thecontroller, is responsible for preparing Petersons master budget and has accumulated the following information for 2013...

2013
	January	February	March	April	May
Estimated sales in units	14,000	15,000	9,000	10,000	10,000
Selling price	$55.00	$52.50	$52.50	$52.50	$52.50
Direct manufacturing labor-hours per unit	2.5	2.5	1	1	1
Wage per direct manufacturing labor-hour	$12.00	$12.00	$12.00	$14.00	$14.00
In addition to wages, direct manufacturing labor-related costs include pension contributions of
$0.40
per hour, worker's compensation insurance of
$0.10
per hour, employee medical insurance of
$0.30
per hour, and Social Security taxes. Assume that as of January 1,
2013
the Social Security tax rates are 7.5% for employers and 7.5% for employees. The cost of employee benefits paid by
Peterson
on its employees is treated as a direct manufacturing labor cost.

Peterson has a labor contract that calls for a wage increase to

$ 14 per hour on April1, 2013. The company will install new labor-saving machinery by March 1,

2013. Peterson expects to have 19,500 frames on hand at December 31, 2012,

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.

Requirement 1.

Prepare a production budget and a direct manufacturing labor budget for

Peterson Company by month and for the first quarter of

2013.

You may combine both budgets in one schedule.

The direct manufacturing labor budget should include labor-hours and show the details for each labor cost category.

Start the schedule by preparing the production budget and calculating the total hours of direct manufacturing labor time needed for the three months in thequarter, then calculate the values for the quarter. Finish by preparing the bottom portion of the schedule for the direct manufacturing labor bymonth, then quarter. (Round your answers to the nearest wholenumber.)

	Prepare a production budget and a direct manufacturing labor budget for PetersonPeterson Company by month and for the first quarter of 2013 You may combine both budgets in one schedule. The direct manufacturing labor budget should include labor-hours and show the details for each labor cost category.
2.	What actions has the budget process prompted Petersons management to take?
3.	How might Peterson's managers use the budget developed in requirement 1 to better manage the company?