Rashid Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Bader, the controller, is responsible for preparing Rashids master budget and has accumulated the following information for 2021:

	2021
	January	February	March	April	May
Estimated sales in units	12,000	16,000	9,000	10,000	10000
Selling price	$55.00	$51.50	$51.50	$51.50	$51.50
Direct manufacturing labor-hours per unit	3.0	3.0	2.5	2.5	2.5
Wage per direct manufacturing labor-hour	$16.00	$16.00	$16.00	$17.00	$17.00

In addition to wages, direct manufacturing labor-related costs include pension contributions of $0.80 per hour, workers compensation insurance of $0.40 per hour, employee medical insurance of $0.50 per hour, and Social Security taxes. Assume that as of January 1, 2021, the Social Security tax rates are 7.5% for employers and 7.5% for employees. The cost of employee benefits paid by Rashid on its employees is treated as a direct manufacturing labor cost.

Rashid has a labor contract that calls for a wage increase to $18per hour on April 1, 2021. New laborsaving machinery has been installed and will be fully operational by March 1, 2021. Rashid expects to have 20,500 frames on hand at December 31, 2021, and it has a policy of carrying an end-of-month inventory of 100% of the following months sales plus 50% of the second following months sales.

Required:

1. Prepare a production budget and a direct manufacturing labor budget for Rashid Company by month and for the first quarter of 2021. 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 Rashids management to take?

3. How might Rashids managers use the budget developed in requirement 1 to better manage the company?