Rocky Ltd is a small business based in Napier, it sells one product which it manufacturers itself. It is currently in the process of establishing the fourth-quarter budget for 2015. Mark Leewood, the production manager has only been working for the company for a month, and is a little bit worried about aligning the production processes. He has asked for your help and provided you with the following information:

• The product sells for $325 per unit.
• Estimated sales volume in units for the next six months is:

September	65,000
October	70,000
November	60,000
December	110,000
January	45,000
February	50,000

• Rocky Ltds policy is to maintain ending finished goods inventory each month at a level equal to 40% of the next months budgeted sales.
• To make one unit of finished product, 5 kilos of direct materials are required.
• Rocky Ltds policy is to have enough materials on hand at the end of the month to equal 30% of next months usage.
• The cost per kilogram of material is $22.50.
• The products contribution margin is $250.

1. Prepare a production budget for Mark Leewood, in units for the last quarter of 2015.
2. Prepare a materials purchases budget for Mark, in kilograms for October and November 2015.
3. What is the cost of purchases in October?
4. Why is it important in a manufacturing environment to prepare a production and purchases budget? Answer with reference to the planning and control cycle.