QUESTION $7$

PART $$A$$: SALES, PRODUCTION, AND DIRECT MATERIALS BUDGET

Oak Creek Company is preparing its master budget for $2020.$ Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales: Sales for the year are expected to total $1$ million units. Quarterly sales are $20\%,25\%,25\%,$ and $30\%,$ respectively. The sales price is expected to be $$40$ per unit for the first three quarters and $$45$ per unit beginning in the fourth quarter. Sales in the first quarter of $2021$ are expected to be $10\%$ higher than the budgeted sales for the first quarter of $2020.$

Production: Management desires to maintain the ending finished goods inventories at $20\%$ of the next quarter's budgeted sales volume.

Direct materials: Each unit requires $2$ kg of raw materials at a cost of $$10$ per kilogram. Management desires to maintain raw materials inventories at $10\%$ of the next quarter's production requirements. Assume the production requirements for the first quarter of $2020$ are $500,000$ kg$.$

Instructions

Prepare the sales, production, and direct materials budgets by quarters for $2020.[$