PART III â€” INCREMENTAL ANALYSIS (26 points)This problem consists of two independent mini-problems.A. Pep Manufacturing produces Product K in batches of 4,000 gallons at $.60 per gallon. Product K can be sold without further processing for $0.80 per gallon. Product K can be processed further to yield Product G, which can be sold for $1.25 per gallon. Product G requires additional processing costs at $1,650 per batch.InstructionsCompute the incremental income from further production of one batch of Product K.B. Parker Manufacturers produces can openers. For the first six months of 2011, the company reported the following operating results while operating at 80% of plant capacity.Sales $4,000,000Cost of goods sold 2,500,000Gross profit 1,500,000Operating expenses 1,000,000Net income $ 500,000Cost of goods sold was 70% variable and 30% fixed. Operating expenses were 70% variable and 30% fixed. In September 2011, Parker Manufacturers receives a special order for 15,000 can openers at $7.50 from a foreign company. The can openers normally sell for $8.00. Acceptance of the special order would result in $5,000 of shipping costs but no increase in fixed operating expenses.InstructionsPrepare an incremental analysis for the special order.PART IV â€” BUDGETARY PLANNING (32 points)This problem consists of four independent mini-problems. Omit headings other than those already given.A. Dryer Manufacturing produces and sells containers designed to hold liquid beverages. The sales budget for 2011 is as follows:1st quarter â€” 90,000 units 3rd quarter â€” 135,000 units2nd quarter â€” 120,000 units 4th quarter â€” 105,000 unitsDryer desires an ending inventory equal to 10% of the next quarter’s sales. January 1, 2011 inventory is 9,000 units. Unit sales during the 1st quarter of 2012 are estimated at 90,000 units.Instructions: Compute required production for the year, showing quarterly data.B. Parker Manufacturers is preparing its direct labor budget for the second quarter of 2011 from the following budgeted production figures: Aprilâ€”70,000 units; Mayâ€”100,000 units; and Juneâ€”110,000 units. Each unit requires 2 hour of direct labor. The hourly wage rates are expected to be $14 in April and May and $16 in June.Instructions: Prepare a direct labor budget for the quarter, showing monthly data.C. Carson’s Widget Works makes 70% of its sales on credit. Experience shows that 60% of the credit customers pay in the month of sale, 30% within the following month, the rest in the next month. Total sales for May, June, July, and August are estimated at $210,000; $240,000; $300,000; and $250,000, respectively.Instructions: Determine budgeted cash receipts for July and August.D. John’s Sporting Goods is preparing its annual cash budget, showing quarterly data, for 2011. A $20,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments at 12% annual interest. The company borrows at the beginning of a quarter based on the estimated deficiency. Interest is paid only when principal is repaid at the end of a quarter with excess cash. The maximum amount of principal was repaid in the second quarter. The cash balance on December 31, 2010 is $21,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at:Quarter 1 Quarter 2 Quarter 3 Quarter 4Disbursements: $226,000 $226,000 $244,000 $260,000Receipts: 216,000 230,000 245,000 253,000Instructions: Prepare a schedule of estimated borrowings and repayments of principal and interest for 2008 and its quarters.