The following information regarding for the preparation of first quarter budget, ended March 31,2020:

1. Units to be sold in January is 1.000 units @$200. The following month units sold increased by 25%.
2. Ending finished goods inventory is 60% of total units sold in the next month.
3. To produce one unit finished goods using 2 types of materials, with the following information:

Material A 2 kgs @ $25

Material B 3 kgs @$28

4. Production needs 3 hours of labor at $22. And ending direct materials is 70% of production.
5. Overhead cost 3 hours per unit at $5 variable overhead costs and fixed overhead is 80% of variable overhead costs.
6. Operating expenses 22% of sales value each month.

Instructions:

1. Prepare a sales, production, purchase, direct labor, FOH, operating expenses budget for first quarter 2020.
2. Why do we always prepare production budget instead of purchasing budget? Explain.