ABRUZZI OLIVE OIL COMPANY Abruzzi Olive Oil Company is a small producer of premium olive oil. Cheryl Sounders, the owner of Abruzzi, is currently developing a budgets spreadsheet to explore the impact of various sales goals on production. In 2014, the company had monthly sales as follows: Month Sales (gallons) January 9200 February 9000 March 9400 April 8600 May 8000 June 8500 July 8800 August 7500 September 8900 October 9300 November 9200 December 9600 At a planning meeting in November 2014, Jay Peters, the marketing manager for Abruzzi, told Cheryl that he expected monthly sales to increase by 5 to 15 percent in the coming year. But in late December 2014, Jay rushed into Cheryls office with some good news. Cheryl, I just had a meeting with Consolidated Restaurants, and theyre considering an order for 1,250 gallons each month for all of 2015. Gosh, Cheryl replied, thats an exciting bit of news, but Im concerned about whether we have the capacity to accept such a large order. Ill prepare budgets assuming we dont get the Consolidated business but we increase monthly sales by 5, 10 or 15 percent. Then Ill assume the Consolidated order comes through, and on top of that we have monthly sales increase of 5, 10, and15 percent. This should give us a good idea of whether well bump up against capacity. Jay thought that this sounded fine, but he wondered whether Cheryl had the time to do this much work. Cheryl indicated that the analysis was relatively easy since she was preparing the budget on a spreadsheet and each analysis would require only a simple change. Required: a. Using a spreadsheet, prepare the six monthly budget schedules that Cheryl suggested (i.e., monthly budgets with and without the Consolidated business assuming other sales increases of 5, 10, and 15 percent). As a general rule Cheryl likes to have ending inventory equal to 12 percent of next months sales. Assume that the company ended 2014 with an inventory of 1,500 gallons of olive oil. In order to calculate ending inventory at the end of December 2015, assume that sales in January 2016 will be the same as December 2015 sales. b. Suppose that capacity is 11,000 gallons. Is the company likely to encounter a capacity problem? c. Abruzzi sells its oil for $25 per gallon. The variable cost per gallon is $10. What will be the annual impact on profit of obtaining the consolidated business (assuming that there is no capacity problem)?