QUESTION 5 (20 marks) Roletter Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Bob Anderson, the controller, is responsible for preparing Roletter's master budget and has accumulated the following information for 2013: 2013 Estimated sales in units Selling price Direct manufacturing labor-hours per unit Wage per direct manufacturing labor-hour January 10,000 $54.00 2.0 $10.00 February 12,000 $51.50 2.0 $10.00 March 8,000 $51.50 1.5 $10.00 April 9,000 $51.50 1.5 $11.00 May 9,000 $51.50 1.5 $11.00 In addition to wages, direct manufacturing labor-related costs include pension contributions of $0.50 per hour, worker's compensation insurance of $0.15 per hour, employee medical insurance of $0.40 per hour, and Social Security taxes. Assume that as of January 1, 2013, the Social Security tax rates are 7.5% for both employers and employees. The cost of employee benefits paid by Roletter on its employees is treated as a direct manufacturing labor cost. Roletter has a labor contract that calls for a wage increase to $11 per hour on April 1, 2013. New labor-saving machinery has been installed and will be fully operational by March 1, 2013. Roletter expects to have 16,000 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. Required: a. Prepare a production budget and a direct manufacturing labor budget for Roletter Company for January, February and March. Both budgets may be combined in one schedule. The direct manufacturing labor budget should include labor-hours, and show the details for each labor cost category. (20 marks) Roletter Company Budget for Production and Direct Manufacturing Labor for the Quarter ended March 31 2013 January Budgeted sales (units) Target ending finished goods inventory (units) Total requirement units) February March Beginning finished goods inventory (units) Units to be produced Direct manufacturing labor-hours per unit Total hours of direct manufacturing labor time needed Direct manufacturing labor costs wages ($10 per DMLH) pension contributions (80.5 per DMLH) workers' compensation insurance ($0.15 per DMLH) Employee medical insurance ($0.4 per DMLH) social security tax (employer's share) ($10*0.075 - $0.75 per DMLH) Total direct manufacturing labor costs