The Deluxe Motorcar in northern California manufactures motor cars of all categories. Its budgeted sales for the most popular sedan model XE8 in 2018 is 4,000 units. Deluxe Motorcar has a beginning finished inventory of 600 units. Its ending inventory is 450 units. The present selling price of model XE8 to the distributors and dealers is $35,200. The company does not want to increase its selling price in 2018.

Deluxe Motorcar does not produce tires. It buys the tires from an outside supplier. One complete car requires five tires including the tire for the extra wheel. The company’s target ending inventory is 400 tires, and its beginning inventory is 350 tires. The budgeted purchase price is $45 per tire.

1. Compute the budgeted revenues in dollars.

2. Compute the number of cars that Deluxe Motorcar should produce.

3. Compute the budgeted purchases of tires in units and in dollars.

4. What actions can Deluxe Motorcar’s managers take to reduce budgeted purchasing costs of tires assuming the same budgeted sales for Model XE8?