Reference no: EM13482651

Yang Company has budgeted the following unit sales:

2008                             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, 2007, was 2,000 units. Each unit requires 3 pounds of raw materials which is 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 8,640 pounds of raw materials on hand at December 31, 2007.

For the first quarter of 2008, prepare (1) a production budget and (2) a direct materials budget.