1. Prepare a production budget and a direct labour budget for Alpha Mann Ltd, by month and for the first quarter of the next budget budgets may be combined into a single schedule. The direct labour budget should include direct labour hours and show the detail for each direct labour cost category.

2. Prepare a manufacturing overhead budget for each month and for the first quarter.

Alpha Mann Ltd makes and sells computer carry bags. Bill Blake, the company accountant, is responsible for preparing the company's annual budget. In compiling the budget data for next year, Blake has learned that new automated production equipment will be installed on 1 March. This will reduce the direct labour per unit from 1 hour to 0.75 hour. Labour-related costs include employer superannuation contributions of 9 per cent of employee wages, workers' compensation insurance of $0.20 per hour, and payroll tax equal to 7 per cent of employee wages. These on-costs are treated as an additional direct labour cost. The accountant estimates that a wage increase for production workers of $4.00 per hour will take place on 1 April. Management expects to have 16 000 bags on hand at the beginning of the budget year, and has a policy of carrying an end-of- month inventory of 100 per cent of the following month's sales plus 50 per cent of the second following month's sales. This and other data compiled by Blake are summarised in the following table: January February March April May 1.0 1.0 0.75 0.75 0.75 $32.00 $32.00 $32.00 $36.00 $36.00 20 000 24 000 16 000 18 000 18 000 $50.00 $47.50 $47.50 $47.50 $47.50 Direct labour hours per unit Wage per direct labour hour Estimated unit sales Sales price per unit Manufacturing overhead: Shipping and handling (per unit sold) Purchasing and material handling (per unit produced) Other (per direct labour hour) $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 4.50 4.50 $ 4.50 $ 4.50 $ 4.50 $10.50 $10.50 $10.50 $10.50 $10.50