1. Prepare a sales budget in good form.
2. Prepare a narrative report explaining how your sales budget was determined. Use the table above in your analysis. (Hint: Many companies would develop their budgets using average sales and average unit costs.)
Whatever budget determination method you use should be explained. In your explanation, you should include a discussion of why you believe sales and selling prices fluctuated last year.
3. Prepare a production budget in units.
4. Prepare a purchases budget. Remember that you will need to purchase enough materials to have the required ending inventories shown. You will also need to purchase enough to manufacture and sell the products on your sales forecast. Do not forget that you have beginning inventories.
5. Prepare a narrative report explaining how you prepared the purchases budget. Be as detailed as necessary to be sure that the president and general manager will understand the calculations and costs.
6. Prepare a budgeted income statement.
7. Prepare a contribution margin income statement.
8. Prepare a narrative report explaining how the expenses on the income statement were determined.
9. Prepare a cash budget. Be sure that you show all cash inflows and outflows.
10. Prepare a narrative report explaining your cash budget process.
11. If necessary, prepare a capital expenditure budget. Explain your entries. Use only the facts in this case to prepare the budget.