Donnegal Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2012.
|
January |
February |
March |
April |
May |
|
|
Estimated unit sales |
10,000 |
12,000 |
8,000 |
9,000 |
9,000 |
|
Sales price per unit |
$50.00 |
$47.50 |
$47.50 |
$47.50 |
$47.50 |
|
Direct labor hours per unit |
2 |
2 |
1.5 |
1.5 |
1.5 |
|
Wage per direct labor hour |
$8.00 |
$8.00 |
$8.00 |
$9.00 |
$9.00 |
Donnegal has a labor contract that calls for a wage increase to $9.00 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1.Donnegal expects to begin the year with 16,000 frames on hand and 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.
Instructions
Prepare a production budget and a direct labor budget for Donnegal Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours