Cornerstone, Inc. manufactures and sells concrete blocks for residential and commercial buildings. Last years sales by quarter were as follows:

Quarter 1 Units Quarter 2 Units Quarter 3 Units Quarter 4 Units

2,000,000 6,000,000 6,000,000 2,000,000

Last year, Cornerstone had one product. Due to customer demand, they now have two types of block Type ABC and Type XYZ. The Sales Director expects sales to be about the same number of units as last year in total, but split by block type. He expects 60% of the sales in each quarter to be Type ABC with a selling price of $0.90 per unit in the first quarter and $1.00 in the rest of the year. Quarter 4, sales of Type XYZ, however are expected to rise to 45%. The selling price for XYZ will be $1.30 per unit in Quarters 1 and 2, and $1.40 for the rest of the year. Cornerstone wants to have on hand (in the warehouse) 5% of the next quarters sales. Assume that the beginning inventory for Type ABC is 100,000 units and 0 for Type XYZ (this is our first year making XYZ blocks).

Block type ABC requires 26 pounds of raw materials (a mixture of cement, sand, gravel and water). Block type XYZ requires 40 pounds of the same raw materials. Cornerstones raw materials inventory policy is that the desired ending inventory of raw materials is equal to 2% of the next periods production needs. Beginning inventory of raw materials is 4,000,000 lbs. Each pound of raw materials costs $0.05. Two types of direct labor is required to complete the concrete block mixers and shapers. Mixers are paid $15 per hour and shapers are paid $18 per hour. Block type ABC requires 10 minutes of mixing time and 5 minutes of shaping time. Block type XYZ requires 15 minutes of mixing time and 8 minutes of shaping time. Variable overhead is allocated at $8 per direct labor hour and fixed overhead last year was $320,000 per quarter ($120,000 for supervision, $200,000 for depreciation and $30,000 for rent). With the 2 products, this year, management thinks the fixed overhead costs will change for the following items: ALL employees receive their salary changes (raises) on April 1st, which is expected to be 4% on average; they are expecting a rent increase from the landlord as of August 1st of $1,000 per month; purchase of new equipment during the first quarter will increase depreciation by $15,000 in quarters 2, 3, and 4.

Advertising expenses are expected to be higher in Quarters 1 and 2 due to increased advertising of our new block type and to coincide with the beginning of the summer building season. Therefore, advertising expenses are expected to be $15,000 and $20,000 in Quarters 1 and 2, respectively, and $10,000 in Quarters 3 and 4. Additional fixed selling expenses each quarter are depreciation of $5,000 and travel of $3,000. Total salaries for sales people are $25,000 per quarter with a $0.025 commission per concrete block sold.

Cornerstone has no variable administrative expenses. Fixed administrative expenses for each quarter are as follows: Salaries, $35,000; Insurance, $4,000; Depreciation, $12,000, and Travel, $2,000.

Required: Create the following budgets:

- Sales budget

- Production budget

- Direct materials purchases budget

- Direct labor budget

- Overhead budget

- Selling expense budget

- Administrative budget