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Donnegal Artistic

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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 2014.
  January    February    March    April    May  
Estimated unit sales   12,000  14,000  10,000  11,000  11,000
Sales price per unit   50.00  47.50  47.50  47.50  47.50
Direct labor hours per un.  2.00  2.00  1.50  1.50  1.50
Wage per direct labor hr  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 17,600 frames on hand and has a policy of
carrying an end-of-month inventory of 100% of the following month’s sales, plus 40% of
the second following month’s sales.

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.

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