High Flyers manufactures competition stunt kites. In November, Jerry Box prepared the following production budget for the first quarter of the coming year. Desired ending inventory is based on the following month€™s budgeted sales.

Following higher-than-expected sales in December, Jerry conducted an inventory count on January 2 and discovered that the company had only 2,000 completed kites on hand. He decided that given the brisk sales in December, the company should increase its desired ending inventory level from 20 to 25 percent of the next month's sales volume.

Required

a. Prepare a new production budget for the first quarter.
b. What other components of the master budget will be affected by thischange?

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Budgeted sales Desired ending inventory Kites needed Less beginning inventory Budgeted production January 20,000 7,000 27,000 4,000 23,000 February 35,000 6,000 41,000 7,000 34,000 March 30,000 2,400 32,400 6,000 26,400 Quarte 85,000 2,400 87,400 4,000 83,400