Problem 1 (12 points)

Smithson Corporation has the following budgeted sales for the selected six-month period:

Month	Unit Sales
June	15,000
July	20,000
August	35,000
September	25,000
October	30,000
November	20,000

There were 4,000 units of finished goods in inventory at the beginning of July. Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month.

Three pounds of materials are required for each unit produced. Each pound of material costs $20. Inventory levels for materials equal 30 percent of the needs for the next month. Materials inventory on July 1 was 20,700 pounds.

Required:

a.	Prepare production budgets in units for July and August.
b.	Prepare a purchases budget in pounds and dollars for July and August.