The Chen Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2019, Chen's budget department gathered the following data to prepare budgets for 2020:

Budget data

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2020

Projected Sales

	Product	Units		Price
	Thingone	69,000		$160
	Thingtwo	44,000		$258

2020

Inventories in Units

		Expected Target
	Product	January 1, 2020		December 31, 2020
	Thingone	24,000		29,000
	Thingtwo	7,000		8,000

Projected direct manufacturing labor data

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Projected direct manufacturing labor requirements and rates for

2020

are:

	Product	Hours per Unit	Rate per Hour
	Thingone	4	$13
	Thingtwo	5	$18

Actual and projected direct materials data

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The following direct materials are used in the two products:

	Amount Used per Unit
Direct Material	Unit	Thingone	Thingtwo
A	pound	6	7
B	pound	4	5
C	each	0	3

Projected data for

2020

for direct materials are:

	Anticipated		Expected		Target
Direct	Purchase		Inventories		Inventories
Material	Price		January 1, 2020		December 31, 2020
A	$13		36,000	lb.	38,000	lb.
B	8		31,000	lb.	34,000	lb.
C	7		9,000	units	12,000	units

Requirement 1. Prepare the revenues budget (in dollars).

Revenues Budget
For the Year Ending December 31, 2020
	Units	Price	Total
Thingone	69,000	$160	$11,040,000
Thingtwo	44,000	258	11,352,000
Budgeted revenues			$22,392,000

Requirement 2. What questions might the CEO ask the marketing manager when reviewing the revenues budget? Explain briefly. (Select all that apply.)

Would increasing the sales force or giving salespersons stronger incentives result in higher sales?

Should the company increase marketing and advertising spending to grow sales?

Is the revenue growing faster than the market?

Requirement 3. Prepare the production budget (in units).

Production Budget (in Units)
For the Year Ending December 31, 2020
		Thingone	Thingtwo
Budgeted unit sales		69,000	44,000
Add target ending finished goods inventory		29,000	8,000
Total required units		98,000	52,000
Deduct beginning finished goods inventory		24,000	7,000
Units of finished goods to be produced		74,000	45,000

Requirement 4. Prepare the direct material purchases budget (in quantities). (For entries with a 0 balance, make sure to enter "0" in the appropriate field.)

Direct Materials Purchases Budget (in Quantities)
For the Year Ending December 31, 2020
		Direct Materials
		A	B	C
To be used in production
Thingone		444,000	296,000	0
Thingtwo		315,000	225,000	135,000
Total		759,000	521,000	135,000
Add target ending inventory		38,000	34,000	12,000
Total requirements		797,000	555,000	147,000
Deduct beginning inventory		36,000	31,000	9,000
Purchases to be made (units)		761,000	524,000	138,000

Requirement 5. Prepare the direct material purchases budget (in dollars).

Direct Materials Purchases Budget (in Dollars)
For the Year Ending December 31, 2020
	Budgeted	Expected
	Purchases	Purchase
	(Units)	Price per unit	Total
Direct material A
Direct material B
Direct material C
Budgeted purchases

5.	Direct material purchases budget (in dollars)
6.	Direct manufacturing labor budget (in dollars)
7.	Budgeted finished-goods inventory at December 31, 2020 (in dollars)
8.	What questions might the CEO ask the production manager when reviewing the production, direct materials, and direct manufacturing labor budgets?
9.	How does preparing a budget help Chen Corporation's top management better manage the company?