Alvarez Company produces various component parts used in the automotive industry. The sales budget for the first eight months of 2010 shows the following projections:

Inventory on December 31 of the prior year was budgeted at 6,250 units. The desired quantity of finished goods inventory at the end of each month in 2010 is to be equal to 25 percent of the next month€™s budgeted unit sales. Each unit of finished product requires 3 pounds of raw material. The company wants to have 30 percent of next month€™s required raw materials on hand at the end of each month.

Required
A. Prepare a production budget for January through June of 2010.
B. Prepare a material purchases budget for the same period assuming that each pound of raw material costs$22.

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Month Month January February March April Units 25,000 27,000 32,000 28,500 Units 31,400 34,500 36,700 35,000 ay June July August