Tipless, Inc., a manufacturer of coffee cups, decided in October 19X0 that it needed cash to continue operations. It began negotiating for a one-month bank loan of $100,000 starting November 1, 19X0. The bank would charge interest at the rate of 1% per month and require the company to repay interest and principal on November 30, 19X0. In considering the loan, the bank requested a projected income statement and cash budget for November.

The following information is available:

* The company budgeted sales at 120,000 units per month in October 19X0, December 19X0, and January 19X1, and at 90,000 units in November 19X0. The selling price is $2 per unit.

* The inventory of finished goods on October 1 was 24,000 units. The finished goods inventory at the end of each month equals 20% of sales anticipated for the following month. There is no work in process.

* The inventory of raw materials on October 1 was 22,800 pounds. At the end of each month, the raw materials inventory equals no less than 40% of production requirements for the following month. The company purchases materials as needed in minimum quantities of 25,000 pounds per shipment.

* Selling expenses are 10% of gross sales. Administrative expenses, which include depreciation of $500 per month on office furniture and fixtures, total $33,000 per month.

Materials (1/2 pound per cup, 50,000 pounds, $2.00 per pound)	$ 50,000
Labor	40,000
Variable overhead	20,000
Fixed overhead (includes depreciation of $4,000)	10,000
Total	$ 120,000

* The manufacturing budget for coffee cups, based on normal production of 100,000 units per month, follows:

Required:

a. Prepare schedules computing inventory budgets by months for

(1) Production in units for October, November, and December.

(2) Raw material purchases in pounds for October and November.

b. Prepare a projected income statement for November. Cost of goods sold should equal the variable manufacturing cost per unit times the number of units sold plus the total fixed manufacturing cost budgeted for the period.