$1200 is not a lot for a quality chair-ottoman set. I buy American-made upholstery with hardwood frames, springdown cushions and hand-tied seating, and it tends to run more. Several years ago, I bought two upholstered chairs from Calico Corners, for $1600 per chair. Ottomans seem to be stupidly expensive. Moderately high-end American-made ottomans seem to hover around $1000.

For more affordable, quality American upholstery, I'd be looking at Lee Industries. It may be somewhat above your price point. I hope that others may be able to suggest more affordable brands. If not, I would seriously consider reupholstering a vintage or second-hand chair/ottoman. The key is that frame and cushions need to be in great condition because fixing them really drives up the price. Another option is to ask your local retailers when they have their big sales.

Tracy, just as mentioned, the frame is the most important starting point. It should be hardwood; minimum 1" thick. A solid hardwood frame with double-doweled joinery is much stronger than a plywood frame with mortise and tenon joinery. But its been a common misconception that todays 8-way hand tied coil springs is the best. Actually a well engineered 8-gauge standard sinuous no-sag springs is more durable and comfortable. At a much lower costs than the other. This is where you can get the best value in upholstery. From this point what drives the price up is the fabric. Their are many fabrics to choose from that provides comfort and is durable without breaking the bank.
The best value is to always buy directly from the manufacture. This will easily save you 50%. Their is no reason why you cant find what your looking for under $1200.

Here is a link that might be useful: buy directly from a manufacturer