1. Production and DM budgets: Stolen Horse, Inc. manufactures and distributes toy dinosaurs throughout the Western United States. Four (4) ounces of plastic are required to manufacture each 'STEGOSAURUS' toy dinosaur, one of the company's products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of the STEGOSAURUS toy occur. To keep production and sales moving smoothly, the company has the following inventory requirements: The finished goods inventory on hand at the end of each month must equal 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 16,600 units. The raw materials inventory on hand at the end of each month must equal 40% of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 96,000 ounces of plastic. The company maintains no work in process inventories. A monthly sales budget for STEGOSUARUS toys for the third and fourth quarters of the year follows. July August September October November December Budgeted Unit Sales 63,000 68,000 78,000 58,000 48,000 38,000 a. Prepare a production budget for STEGOSAURUS for the months July, August, September, and October. STEGOSAURUS Production Budget July August September October Total Budgeted Unit Sales 68,000 78,000 58,000 267,000 Desired units of ending 13,600 15,600 11,600 9.600 9,600 finished goods inventory TE (20% of next month) Total units needed/required 76,600 83,600 89,600 67,600 317,400 Units of beginning finished 12,600 13,600 15,600 11.600 12,600 goods Inventory Required production, in 64.000 97.200 105,200 79.200 345.600 units b. Prepare a direct materials (DM) budget showing the quantity of plastic (in ounces) to be purchased for each of the months of July, August, and September and for the third quarter in total. STEGOSAURUS Direct Materials Budget