Leicester Art makes and sells custom frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2020.

Leicester has a labor contract that calls for a wage increase to £9.00 per hour on April 1. New laborsaving machinery has been installed and will be fully operational by March 1. 

Leicester 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.

Instructions

Prepare a production budget and a direct labor budget for Leicester by month and for the first quarter of the year. The direct labor budget should include direct labor hours.

Transcribed Image Text:

January February March April May Estimated unit sales Sales price per unit Direct labor hours per unit Wage per direct labor hour 12,000 14,000 13,000 11,000 11,000 £47.50 £50.00 £47.50 £47.50 1.5 £ 8.00 £47.50 2.0 2.0 1.5 1.5 £ 8.00 £ 8.00 £ 9.00 £ 9.00