During the first calendar quarter of 2019, Williams Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 8,000 units in the urban region at a unit price of \($65\) and 6,000 units in the rural region at \($55\) each. Because the sales manager expects the product to catch on, she has asked for production sufficient to generate a 4,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses:

Required

a. Assuming that the desired ending inventories of materials A and B are 4,000 and 20,000 pounds, respectively, and that work-in-process inventories are immaterial, prepare budgets for the calendar quarter in which the new product will be introduced for each of the following operating factors: 

1. Total sales 

2. Production 

3. Material purchases cost 

4. Direct labor costs 

5. Manufacturing overhead costs 

6. Selling and administrative expenses

b. Using data generated in requirement (a), prepare a budgeted income statement for the calendar quarter. Assume an overall effective income tax rate of 35%. (Round income statement amounts to the nearest dollar.)

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Variable Fixed (per Unit) (Total) Manufacturing costs: Direct materials: A (2 lbs. @$2.50/lb.).. B (5 lbs. @ $1.40/lb.). Direct labor (2 hrs./unit) Manufacturing overhead: Depreciation Factory supplies Supervisory salaries Other... $ 5.00 7.00 10.00 0.55 0.65 - $22,500 2,500 - 16,250 9,200 Operating expenses: Selling: Advertising. Sales salaries and commissions" 1.25 12,500 20,000 Other* 0.50 4,200 Administrative: Office salaries - 15,000 Supplies. 0.40 1,200 Other. 0.25 5,000