Farmer Manufacturing, Inc. prepares their budgets on a quarterly basis. Below is information which will be used to prepare their first quarter budget.

Forecasted sales in units for each product are as follows:

	January	February	March
Product A	22,000 units	25,000 units	33,000 units

The average selling price is $36 per unit.

Below is additional information which will be needed to prepare the master budget:

Company policy requires that each month’s ending inventory (finished goods) be equal to 40% of the next month’s estimated sales. Ending inventory on December 31 was 8,800 units. Sales for April are projected to be 39,000 units, and sales for May are projected to be 42,000 units.

Information on material and labor requirements include:

Product A
Ingredient Q (per unit)	3 pounds
Price: Ingredient Q	$2.75 per pound
Direct labor hours (per unit)	0.70
Direct labor rate per hour	$16.00

Company policy requires that the ending inventory for raw material be equal to 30% of the following month’s estimated material requirements. Ending inventory on December 31 for Ingredient Q was 20,800 pounds.

Manufacturing overhead includes both variable and fixed components. Overhead is allocated based on direct labor hours. Variable overhead is budgeted at $3.25 per direct labor hour required. Fixed overhead is budgeted at $34,500 per month.

Selling expenses include sales commissions and sales salaries. Commissions are paid at 4% of sales. Monthly sales salaries are $4,200. General and administrative expenses are $6,400 per month.

Part I Requirements:

1. Prepare a monthly Sales Budget for the first quarter.
2. Prepare a monthly Production Budget for the first quarter.
3. Prepare a monthly Direct Material Purchases Budget for the first quarter.
4. Prepare a monthly Direct Labor Budget for the first quarter.
5. Prepare a monthly Overhead Budget for the first quarter.
6. Prepare a monthly Selling, General, & Administrative Expense Budget for the first quarter.