A company produces and sells organic chips. The one$-$pound family size bag of chips has two direct materials $-$ potatoes and packaging. The production process includes slicing the potatoes, lightly frying them, and lightly seasoning them with salt. Indirect materials include small amount of oil used to fry the chips and salt. The company is preparing budgets for the third quarter ending September $30,2024.$

For each of the requirements $(1-8)$ below, prepare monthly budgets for July, August, and September, along with a total budget for the quarter.

$1.$ The previous year$$s sales $(2023)$ for the corresponding period were:

July $50,000$ bags

August $60,000$ bags

September $75,000$ bags

October $65,000$ bags

November $55,000$ bags

The company expects the above volume of sales to increase by $9\%$ for the period July $2024$ November $2024.$ The budgeted selling price for $2024$ is $$9\mathrm{.}00$ per bag of chips. The company expects $40\%$ of its sales to be cash $($COD$)$ sales. The remaining $60\%$ of sales will be made on credit. Prepare a Sales Budget for the company.

$2.$ The company desires to have finished goods inventory on hand at the end of each month equal to $11$ percent of the following month's budgeted unit sales. On June $30,$ the company expects to have $5,995$ bags of chips on hand. Use the @ROUNDUP function to round up to the nearest whole number of units in desired ending inventory. Prepare a Production budget.

$($NOTE: an estimate of sales in October is required in order to complete the production budget for September$).$

$3.$ The final product $($bags of chips$)$ requires two direct materials: potatoes and packaging.

Potatoes:

$4$ pounds of raw potatoes are required for each one$-$pound bag of potato chips.

Management desires to have materials on hand $($i$.$e$.,$ pounds of potatoes$)$ at the end of each month equal to $20$ percent of the following month's production needs. Use the @ROUNDUP function to round up to the nearest whole number of pounds of potatoes desired in ending inventory. The beginning materials inventory, July $2024,$is expected to be $44,560$ pounds. Potatoes cost $$1\mathrm{.}20$ per pound. Use the @ROUNDUP function to round up to the nearest whole number of pounds of potatoes to purchase $($DM to purchase$).($NOTE: budgeted production in October is required in order to complete the direct materials budget for September.$)$

Packaging:

Packaging material is purchased by the roll and $100$ bags of chips are produced from each roll. The packaging is made from biodegradable, organic plant fiber that extends the shelf life of the potato chips while preserving its freshness. Management desires to have packaging on hand at the end of each month equal to $15$ percent of the following month's production needs. Use the @ROUNDUP function to round up to the nearest whole number of rolls of packaging desired in ending inventory. The beginning inventory of packaging $($i$.$e$.,$ rolls of packaging material$)$ in July $2024$ is expected to be$84$ rolls. Packaging is expected to cost $$18$ per roll. Use the @ROUNDUP function to round up to the nearest whole number of rolls of packaging to purchase $($DM to purchase$).($NOTE: budgeted production in October is required in order to complete the direct materials budget for September.$).$ Prepare a Direct Materials budget. Also, because two direct materials are required for production $$ potatoes and packaging $$ you will need a separate schedule for each direct material.

$4.$ Each bag of chips requires $0\mathrm{.}02$ hours of direct labor. Each hour of direct labor costs the company $$22.$ Prepare a Direct Labor budget.

$5.$ The company budgets indirect materials $($e$.$g$.,$ salt, oil$)$ at $$0\mathrm{.}20$ per bag. The company treats indirect labor and utilities as mixed costs. The variable components are $$0\mathrm{.}40$ per bag for indirect labor and $$0\mathrm{.}30$ per bag for utilities. The following fixed costs per month are budgeted for indirect labor, $$30,000,$ utilities, $$5,000,$ and other, $$15,000.$ Prepare a Manufacturing Overhead budget.

$6.$ Variable selling and administrative expenses are $$0\mathrm{.}70$ per bag of chips sold. Fixed selling and administrative expenses are $$25,000$ per month. These costs are not itemized, i$.$e$.,$ the budget has only two line items $$ variable operating expenses and fixed operating expenses. Prepare an Operating Expenses budget.

$7.$ Prepare a Budgeted Manufacturing Cost per unit budget. Refer to exhibit $9-11$ for

guidance. To calculate FMOH$/$unit calculate total FMOH for the year and divide this

by budgeted production for the year. The total production volume for the year is

budgeted at $800,000$ bags.

$8.$ Prepare a Budgeted Income Statement for the quarter for the company. Assume interest expense of $$0,$ and income tax expense of $25\%$ of income before taxes. The company's goal for the quarter is to make its net income greater than $10\%$ of its sales revenue.