Sleepeze Company produced a variety of pillows for catalog sales, two popular types are the standard pillow and the neck roll. The standard pillow sells for $4 and the neck roll sells for $3. Projected sales of the two types of pillows for the coming four quarters are as follows:

Standard pillow neck roll

First quarter 5,000 4,000
Second quarter 6,500 4,500
Third quarter 10,000 8,000
Fourth quarter 5,500 5,000

The president of the company believes that the projected sales are realistic and can be achieved by the company.

In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 300 standard pillows and 170 neck rolls were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter's sales for standard pillows and 10 percent of next quarter's for neck rolls

Required:

1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.

2. What factors might sleepeze company have considered in preparing the sales budget.

3. Prepare a separate production budget for each product for each of the first three quarters of the year.