Gamma Ltd. manufactures and sells two products, Ago and Bago. In July 2019 Gamma’s Budget Department gathered the following data in order to prepare the individual budgets in
the master budget for 2020:

2020 Projected Sales :

Product Unit Price
Abba 90,000 $ 180
Baba 70,000 $ 250

2020 Inventories in Units:

Target:

Product January 1, 2020 December 31, 2020

Abba 21,000 25,000

Baba 10,000 11,000

To produce 1 unit of Ago and Bago, the following direct materials are used:

Direct Material Unit Ago Bago

A Pounds 5 6

B Pounds 3 4

C Each 0 1

Projected data for 2020 with respect to direct materials are as follows:

Direct Material Purchase Price:

Target Inventories

January 1, 2020, December 31, 2020

A $14 32,000 pounds 35,000 pounds

B $6 27,000 pounds 30,000 pounds

C $4 6,000 units 7,000 units

Projected direct manufacturing labor requirements and rates for 2020 are as follows:

Product Hours Per Unit Rate per Hour

Ago 4 $15

Bago 5 $19

Manufacturing overhead is allocated at the rate of $20 per direct manufacturing labor-hour.

1) Prepare the following budgets for 2020:

a) Revenue budget (in dollars)

b) Production budget (in units)

c) Direct materials purchases budget (in quantity)

d) Direct materials purchases budget (in dollars)

e) Direct manufacturing labor budget (in dollars)

2) By reference to 1 above, how would management use the Master budget?