Narisho Supply is in the process of preparing the budget for the first quarter of 2011. The following projections for unit sales have been made:

Each finished unit requires three direct materials: 4 pounds of Material M, 2.5 pounds of Material N, and 2 pounds of Material O. Based on company policies, the following estimates of finished units and pounds of direct material inventories are made:

a. Prepare a monthly production and purchases budget for the first quarter of 2011.
b. The production supervisor wants to purchase new production equipment for 2011. Such equipment would largely replace the current labor-intensive production system. Write a memo to corporate management explaining why new production equipment could affect the production and purchases budget.
c. Who should be consulted to determine the new material requirements per unit if the new production equipment isinstalled?

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January February March Total Sales 72,000 64,000 60,000 196,000 Finished units Direct material M Direct material N Direct material O December 18,000 13,500 9,000 7,300 January 16,000 12,000 8,000 9,400 February 15,000 11,250 7,500 8,200 March 14,000 10,500 7,000 8,500