Chpt 6*Budgeting is the common accounting tool companies use for planning and controlling. Budgets serve as the financial expression of management’s plans for the upcoming period*[AICPA Adapted] Dewitt Co. budgeted its activity for October 2004 from the following information:• Sales are budgeted at $750,000. All sales are credit sales and a provision for doubtful accounts is made monthly at the rate of 2% of sales. • Merchandise inventory was $120,000 at September 30, 2004, and an increase of $10,000 is planned for the month.• All merchandise is marked up to sell at invoice cost plus 50%.• Estimated cash disbursements for selling and administrative expenses for the month are $105,000.• Depreciation for the month is projected at $25,000.Dewitt is projecting operating income for October 2004 in the amount of 105,000.*The major benefits of budgets are compels planning, provides performance criteria, and promotes coordination and communication.* Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005.July 1, 2004 June 30, 2005Raw material1 40,000 10,000Work in process 8,000 8,000Finished goods 30,000 5,0001 Three (3) units of raw material are needed to produce each unit of finished product.