Ehrlich Corporation manufactures and sells a product for $8 per unit. All sales are on credit.

1. Budgeted unit sales for the 4 months are as follows:

   January - 40,000

   February - 60,000

   March - 100,000

   April - 50,000

2. Sales are collected in the following pattern: 75% in the month the sales are made, and the remaining 25% in the following month. On January 1, the companys balance sheet showed $65,000 in accounts receivable, all of which will be collected in the first month of the year. Bad debts are negligible and can be ignored.

3. The company desires an ending finished goods inventory at the end of each month equal to 30% of the budgeted unit sales for the next month. On January 1, the company had 12,000 units on hand.

4. 5 pounds of raw materials are required to complete one unit of product. The company requires ending raw materials inventory at the end of each month equal to 10% of the following months production needs. On January 1, the company had 23,000 pounds of raw materials on hand. Each pound of raw materials costs $.80.

Required:

Prepare the following budgets and schedules for the quarter, showing both monthly and total figures:

1. A sales budget and a schedule of expected cash collections.

2. A production budget.

3. A direct materials budget.