Fenzel Slide Oil produces a lubricant, Slick-tone, which is used on trombone slides. Information about the budget for the year 2012 is as follows:

1. The company expects to sell 6,000 bottles of Slick-tone in the first quarter, 7,000 in the second quarter, 9,000 in the third quarter, and 5,000 in the fourth quarter.

2. A bottle of Slick-tone requires 4 ounces of Chemical A and 2 ounces of Chemical B.

3. For the first, second, and third quarters of 2012, the desired ending inventory of finished goods is equal to 10 percent of next quarter's sales, whereas the desired ending inventory for material is 20 percent of next quarter's production requirements.

4. There are 600 bottles of Slick-tone, 4,000 ounces of Chemical A, and 2,400 ounces of Chemical B on hand at the beginning of the first quarter.

5. At the end of the fourth quarter, the company must have 1,000 bottles of Slick-tone, 8,000 ounces of Chemical A, and 4,000 ounces of Chemical B to meet its needs in the first quarter of 2013.

6. The cost of Chemical A is $1.20 per ounce, the cost of Chemical B is $2.15 per ounce, and the selling price of Slick-tone is $12.00 per bottle.

7. The cost of direct labor is $0.55 per bottle, and the cost of variable overhead is $0.75 per bottle. Fixed manufacturing overhead is $3,000 per quarter.

8. Variable selling and administrative expense is 4 percent of sales and fixed selling and administrative expense is $3,000 per quarter.

Required:

a. Prepare a production budget for each quarter of 2012.

b. Prepare a material purchases budget for each quarter of 2012.

c. Prepare a budgeted income statement for each quarter of 2012 (ignore taxes).