1. Prepare the company’s production budget for the upcoming fi scal year. 2. Prepare the company’s direct materials budget and schedule of expected cash disbursements for purchases of materials for the upcoming fi scal year.

The marketing department of Gaeber Industries has submitted the following sales forecast for the
upcoming fi scal year:

                                             1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted unit sales . . . . . . .   8,000       7,000         6,000      7,000

The company expects to start the fi rst quarter with 1,600 units in fi nished goods inventory.
Management desires an ending fi nished goods inventory in each quarter equal to 20% of the next
quarter’s budgeted sales. The desired ending fi nished goods inventory for the fourth quarter is
1,700 units.
In addition, the beginning raw materials inventory for the fi rst quarter is budgeted to be
3,120 pounds and the beginning accounts payable for the fi rst quarter is budgeted to be $14,820.
Each unit requires 2 pounds of raw material that costs $4.00 per pound. Management desires
to end each quarter with an inventory of raw materials equal to 20% of the following quarter’s
production needs. The desired ending inventory for the fourth quarter is 3,140 pounds. Management plans to pay for 75% of raw material purchases in the quarter acquired and 25% in the following quarter.
Required:
1. Prepare the company’s production budget for the upcoming fi scal year.
2. Prepare the company’s direct materials budget and schedule of expected cash disbursements
for purchases of materials for the upcoming fi scal year.