Discount Furniture Pty Ltd manufactures a variety of desks, chairs, tables and shelf units which are sold to public school systems throughout Queensland. The accountant of the companys School Desk Division is currently preparing a budget for the first quarter of 2018. The following sales forecast has been made by the division's sales manager.

January 5,000 desk and chair sets

February 6,000 desk and chair sets

March 7,500 desk and chair sets

April 7,500 desk and chair sets

Each desk and chair set requires 10 metres of pine planks and 1.5 hours of direct labour. Each set sells for $50. Pine planks cost $0.50 per metre and the division ends each month with enough wood to cover 10 per cent of the next month's production requirements. The division incurs a cost of $20.00 per hour for direct labour wages and fringe benefits. The division ends each month with enough finished goods inventory to cover 20 per cent of the next month's sales. Also, assume that April's production will total 8,000 units.

Required:

(a) Prepare the Production Budget for Discount Furniture Pty Ltd for January, February and March, using the information provided.

(b) Prepare the Direct Materials Purchases Budget for January February, and March, using the information provided.

(c) Outline three purposes of preparing budgets such as the Production and Direct Materials Purchases budgets considered here.