Canine Cuisine Company, owned by Goode Doggie, produces dog food that it sells in 10-pound bags for $7.00 per bag. Other information about the company includes the following:

(a) Sales estimates for the first four months of the year are as follows: January—50,000 bags, February —40,000 bags, March—55,000 bags, and April—50,000 bags. The end- ing inventory of dog food each month is 20% of the next month’s sales estimate (in bags).All sales are cash sales. ‘$

(b) Canine Cuisine makes the dog food from a mixture of direct materials costing $.10 per pound. Each month’s ending inventory of direct materials (in pounds) is 50% of the next month’s usage requirement. Payment for direct materials is made in the month of purchase, with no cash discounts taken.

(c) Each bag of dog food requires 0.10 hours of direct labor costing $10 per hour. Canine Cuisine pays three-fourths of each month’s direct labor cost in the month incurred and one-fourth in the following month. The wages payable for direct labor at the beginning of January was $15,500 for the 62,000 bags of dog food produced in December.

(d) Canine Cuisine’s variable factory overhead costs are $1.40 per bag produced, and fixed factory overhead is $60,000 per month (which includes $25,000 of depreciation). Factory overhead costs (except for depreciation) are paid in the month after they are incurred.

(e) Canine Cuisine pays both variable selling expenses of $1.00 per bag sold and fixed selling expenses of $10,000 per month in the same month incurred.

(f) General and administrative expenses totaling $65,000 per month (including $20,000 depreciation) are all fixed. Canine Cuisine pays them (except for depreciation) in the month after they are incurred.

(g) Canine Cuisine’s cash balance on January | is $45,000.

Required: Prepare a production budget, a direct materials purchases budget, a direct labor budget, and a cash budget for each of the first two months of the year. lpo8