Tonga Toys manufactures and distributes a number of products to retailers. One of these products, Playclay, requires 0.10 hours of labour time manufacture each unit. The company is now planning labour needs for the third quarter - July, August, and September. Currently, the average rate per labour hour is $16 per hour. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements:

a. The finished goods inventory on hand at the end of each month must be equal to 20% of next month's sales. The finished goods inventory on June 30 is budgeted to be 16,400 units.

b. The company maintains no work in process inventories

A sales budget for Playclay for the last six months of the year follows: Budgeted Sales in Units July August Septembe r October 52,000 75,000 78,000 80,000

Required: 1. Prepare a production budget for Playclay for the months July, August, September, and total for the quarter. - 6 Marks

2. Prepare a Labour budget for Playclay for the months July, August, September, and total for the quarter. - 6 Marks