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Garver Industries has budgeted the following unit sales: 2012: Month, Units January, 10,000 February, 8,000 March, 9,000 April, 11,000 May, 15,000 The finished goods units on hand on December 31, 2011, was 2,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 20% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 30% of the pounds needed for the following month's production. There were 5,760 pounds of raw materials on hand at December 31, 2011. Instructions For the first quarter of 2012, prepare (1) a production budget and (2) a direct materials budget.
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