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 lower-than-expected sales in December, Jerry conducted an inventory count on January 2 and  discovered that the company had 6,000 completed kites on     hand. He decided that given the slow sales  in December, the company should decrease its desired ending inventory level from 20 to 15% 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 this change?

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January February March Quarter Budgeted sales Desired ending inventory 41,000 34,000 37,000 112,000 7,000 6,000 2,400 2,400 Kites needed 48,000 40,000 39,400 114,400 Less beginning inventory Budgeted production 4,000 7,000 6,000 4,000 44,000 33,000 33,400 110,400