(Production, direct materials, and direct labor budgets) Gerrad Manufac- turing has projected sales of its product for the next six months as follows:

January - 300 units

February - 700 units

March - 1,000 units

April - 900 units

May - 400 units

June - 300 units

The finished product requires 3 pounds of raw material and 10 hours of direct labor. Gerrad tries to maintain a Finished Goods ending inventory equal to the next two months of sales and a Raw Material ending inventory equal to one-half of the current month's production needs. January's beginning inventories are expected to conform to company policy.

a. How to prepare a production budget for February, March, and April.

b. How to prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to

be $2 in February, $2.30 in March, and $2.40 in April.

c. How to prepare a direct labor budget (assuming a $12 per hour rate) for February, March,

and April.