Prepare the production budget, by month, for the first three months.
Frausto, Inc., plans to produce 22,000; 24,000; 26,000; 28,000; 30,000; and 32,000 units for the first six months, respectively, of the coming year. Each unit requires 2 liters of direct materials that cost $3 per liter. Frausto indicates that the beginning inventory of direct materials is 5,000 liters, but Frausto wants to reduce inventory by 5 percent of what is needed for the next month's production. Frausto pays for 70 percent of its purchases in the month of purchase, taking a 3 percent discount. The remaining purchases are paid in the month following purchase. Frausto indicates that the beginning accounts payable balance is $24,000.
Prepare Frausto's direct materials purchases budget by month for the first quarter.