Chapter 23, Problem 23.5AP

(a)

To determine

Direct Materials Budget: The direct materials purchase budget shows the quantity of purchases of direct materials, which are necessary to meet up the budgeted production and inventory. This budget shows the costs, which are associated with the purchases of direct materials.

Budgeted Income Statement: The budgeted income statement is a statement which shows the financial performance of a company. This statement shows the revenue earned and the expenses incurred in a particular financial period. This statement shows all the operating as well as non-operating activities of a business.

To prepare: The merchandise purchases budget for each month.

(b)

To determine

To prepare: the budgeted multiple-step income statement for each month.