Fuqua SA’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 4 kilograms of materials, which cost €2 per kilogram. Fuqua desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.

Instructions

a. Prepare a production budget for January and February 2020.

b. Prepare a direct materials budget for January 2020.