The Old Rocking Company (ORC) manufactures antique-looking rocking chairs. Budgeted sales for the first two months of the year are as follows: Budgeted Sales (Units) January 200 February 240 The company wants to maintain a finished goods inventory of rocking chairs equal to 25 percent of the months sales. At the beginning of January, 40 chairs are on hand. Each rocking chair requires 10 square meters of wood at a cost of $20 per square meter. Assume the company maintains an inventory of raw materials, namely wood, equal to 10 percent of the months production needs. At the beginning of January, 240 square meters of wood are on hand. ORC manufacturing is heavily labor intensive and has been using direct labor hours to allocate manufacturing overhead costs. ORC estimated 50,000 total direct labor hours and $500,000 manufacturing overhead are required for the next twelve months. Each completed unit of rocking chair requires 1.5 direct labor hours and ORC is paying its labor $8 per hour.

A. Prepare a production budget (how many chairs to produce) and raw material purchase budget (in $) for January and February.

B. Prepare direct labor and manufacturing overhead budget for January