The Outdoor Company makes and sells tents and backpacks. Both products are made of nylon and plastic. Each tent requires 15 yards of nylon and 3 pounds of plastic to produce, and each backpack uses 2 yards of nylon and 0.5 pounds of plastic. The company expects to sell the tents for $245 per unit and the backpacks for $180 per unit in the third quarter. It has compiled the following budgeted sales data (in units) to use in preparing its operating budget for the third quarter of 2020: Tents Backpacks July 10,400 14,500 August 11,200 13,000 September 8,100 7,400 At the start of July, the company has 2,800 tents and 4,200 backpacks in its finished goods inventory, and 18,100 yards of nylon and 8,200 pounds of plastic in its direct materials inventory. The company uses FIFO for all its inventory. It paid $7.10 per yard for the nylon and $2.60 per pound for the plastic it had on hand at the start of July. When making its third quarter operating budget, The Outdoor Company plans each month to have 20% of each product's unit sales in the following month in ending finished goods inventory. It also plans each month to have 10% of the direct materials used in production that month in ending direct materials inventory. It expects to pay $8.50 per yard for nylon and $4 per pound for plastic in the third quarter. Finally, the company expects its cost of goods sold to be 65% of its revenues for each month of the third quarter. It plans to ship its products in shipments of 50 units at a cost of $30 per shipment, to spend 15% of its monthly revenues on marketing expenses, and to have $664,300 of administrative costs for each month of the third quarter. 1. Prepare the production budget (in units) for the month of July. 2. Prepare the direct materials usage budget (in units and dollars) for the month of July. 3. Prepare the budgeted income statement for the month of July. 4. Assume ABC Manufacturing Company has already prepared its operating budget for 2021; however, Michael, the production manager, has come up with a revised manufacturing process that he would like to implement in 2021. For the past few years, the company has been wasting a lot of steel, a key direct material in its products, during the manufacturing process. Michael has found another way for the company to manufacture its products in 2021, and the new manufacturing process is expected to use fewer pounds of steel per unit produced. He has provided this updated information on the expected pounds of steel per unit produced for the 2021 operating budget. a. Use the table below in column (a) to state whether each of the parts of the operating budget will change as a result of this change in the company's manufacturing process. b. For the ones that will change, use column (b) to explain specifically how they will change (i.e., after the new information is incorporated into the operating budget, what exactly will be different on each part of the operating budget that you expect to change and how will it be different?) Operating budget parts (a) Will it change? (b) For the ones that change, explain specifically how it will change Revenues budget Production budget Direct material usage budget Direct material purchases budget Direct labor cost budget Manufacturing overhead cost budget Budgeted unit cost of ending finished goods inventory Ending inventories budget Cost of goods sold budget Operating costs budget Budgeted income statement The Outdoor Company makes and sells tents and backpacks. Both products are made of nylon and plastic. Each tent requires 15 yards of nylon and 3 pounds of plastic to produce, and each backpack uses 2 yards of nylon and 0.5 pounds of plastic. The company expects to sell the tents for $245 per unit and the backpacks for $180 per unit in the third quarter. It has compiled the following budgeted sales data (in units) to use in preparing its operating budget for the third quarter of 2020: Tents Backpacks July 10,400 14,500 August 11,200 13,000 September 8,100 7,400 At the start of July, the company has 2,800 tents and 4,200 backpacks in its finished goods inventory, and 18,100 yards of nylon and 8,200 pounds of plastic in its direct materials inventory. The company uses FIFO for all its inventory. It paid $7.10 per yard for the nylon and $2.60 per pound for the plastic it had on hand at the start of July. When making its third quarter operating budget, The Outdoor Company plans each month to have 20% of each product's unit sales in the following month in ending finished goods inventory. It also plans each month to have 10% of the direct materials used in production that month in ending direct materials inventory. It expects to pay $8.50 per yard for nylon and $4 per pound for plastic in the third quarter. Finally, the company expects its cost of goods sold to be 65% of its revenues for each month of the third quarter. It plans to ship its products in shipments of 50 units at a cost of $30 per shipment, to spend 15% of its monthly revenues on marketing expenses, and to have $664,300 of administrative costs for each month of the third quarter. 1. Prepare the production budget (in units) for the month of July. 2. Prepare the direct materials usage budget (in units and dollars) for the month of July. 3. Prepare the budgeted income statement for the month of July. 4. Assume ABC Manufacturing Company has already prepared its operating budget for 2021; however, Michael, the production manager, has come up with a revised manufacturing process that he would like to implement in 2021. For the past few years, the company has been wasting a lot of steel, a key direct material in its products, during the manufacturing process. Michael has found another way for the company to manufacture its products in 2021, and the new manufacturing process is expected to use fewer pounds of steel per unit produced. He has provided this updated information on the expected pounds of steel per unit produced for the 2021 operating budget. a. Use the table below in column (a) to state whether each of the parts of the operating budget will change as a result of this change in the company's manufacturing process. b. For the ones that will change, use column (b) to explain specifically how they will change (i.e., after the new information is incorporated into the operating budget, what exactly will be different on each part of the operating budget that you expect to change and how will it be different?) Operating budget parts (a) Will it change? (b) For the ones that change, explain specifically how it will change Revenues budget Production budget Direct material usage budget Direct material purchases budget Direct labor cost budget Manufacturing overhead cost budget Budgeted unit cost of ending finished goods inventory Ending inventories budget Cost of goods sold budget Operating costs budget Budgeted income statement