Read the case (attached file) and answer base on the requirement below:

(using file Word) 1500 words

REQUIREMENTS:

1. Prepare a sales budget in good form.

2. Prepare a narrative reportexplaining how your sales budget was determined. Use the table above inyour analysis. (Hint: Many companies would develop their budgets usingaverage sales and average unit costs.)

Whatever budgetdetermination method you use should be explained. In your explanation,you should include a discussion of why you believe sales and sellingprices fluctuated last year.

3. Prepare a production budget in units.

4.Prepare a purchases budget. Remember that you will need to purchaseenough materials to have the required ending inventories shown. You willalso need to purchase enough to manufacture and sell the products onyour sales forecast. Do not forget that you have beginning inventories.

5. Prepare a narrative reportexplaining how you prepared the purchases budget. Be as detailed asnecessary to be sure that the president and general manager willunderstand 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.

Summary:

Your finished case will consist of sixor seven budgets (a sales budget, a production budget in units, apurchases budget, a budgeted income statement, a contribution marginincome statement, a cash budget, and, if necessary, a capitalexpenditure budget.)

You will also havefour or five narrative reports (a sales budget report, a purchasesbudget report, an income statement report, a cash budget report, and anexplanation of your capital budget, if necessary).

Narrativereports are reports that are in the form or a white paper that clearlyexplains the numeric entries on your budgets. The length of thenarrative reports will depend on the particular report. In general, youshould be able to prepare the sales budget report on one or two pages,the purchases budget report on one or two pages, the income statementreport on one page, and the cash budget report on one page. In thiscase, the capital budget report would be less than one page. You shouldnot worry if one of your reports is more or less than the recommendationgiven here—just be sure you cover all of the important points andsatisfactorily explain the numeric entries in your budget. Also, be sureyou explain the process of “how” your numbers were determined. In thisregard, it is not necessary or desirable to explain the exactcalculations. Consider your audience and prepare a report that would besuitable for executives making plans and decisions for the upcomingyear.

¹Harvey’s budget is adapted from a published case. (Source and citation are available upon request to faculty only).