Persian Carpets Manufacturing Company Limited produced machine-weave carpets. At a Board of Directors meeting held in November 2018, it was resolved to produce 10,000 carpets in the year 2019, which was 800 more than the actual output in the year 2018. The expected selling price would be $2,000 per carpet. The sales manager considered that the quantity to be sold and the unit price were acceptable by the market under the current economic conditions. The sales manager also proposed to increase the advertising expense from $800,000 in year 2018 to $1,300,000. The increase took into account of the inflation in year 2019 and an additional spending. The additional spending might push the number of carpets sold by 15% over the targeted sales of 10,000 carpets. The budgeted advertising expense would be $900,000 without the additional spending. The production manager confirmed the factory capability of producing 15,000 carpets a year. Assuming there would be no beginning and ending inventories, the management accountant provided details of the budgeted costs as follows: (i) Prime costs Details Raw materials per carpet Direct labour Units 5 kilograms 10 hours Unit price $50/kg. $60/hour (ii) Actual factory overhead in year 2018 Details Amount ($) Forecast for 2019 Factory rent 500,000 Increase of 12% Depreciation of machines 300,000 Unchanged Factory utilities expense 240,000 Increase of 20% Indirect labour wages 360,000 Budget $500,000 Advertising expense 800,000 See comments of sales manager Operating expense 1,000,000 Increase of 15% Required: (a) Prepare a budget for the year 2019 based on the resolution of Board of Directors meeting in November 2018. [10 marks] (b) Prepare a budget for the year 2019 based on sales manager's suggestion. [5 marks] (C) What are strategy plans and operating plans? [5 marks]