Sales and production budget. Purity, Inc., bottles and distributes mineral water from the company’s natural springs in Northern Ontario. Purity markets its product in 1-litre dispos¬

able plastic bottles and in 16-litre reusable plastic containers.

Required 1. For the year 2008, Purity marketing managers project monthly sales of 480,000 1-litre and 120,000 16-litre units. Average selling prices are estimated at $0.30 per 1-litre unit and

$1.80 per 16-litre unit. Prepare a revenue budget for Purity, Inc., for the year ending December 31, 2008.

2. Purity begins 2008 with 1,080,000 1-litre units in inventory (that is, beginning inventory).

The VP of Operations requests that 1-litre ending inventory on December 31, 2008, be no fewer than 720,000 units. Based on sales projections as budgeted above, what is the minimum number of 1-litre units Purity must produce during 2008?

3. The VP of Operations requests that ending inventory of 16-litre units on December 31, 2008, be 240,000 units. If the production budget calls for Purity to produce 1,560,000 16-litre units during 2008, what is the beginning inventory of 16-litre units on January 1, 2008?