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5-12 Preparing a production budget (LO 3) High Flyers manufactures competition stunt kites. In November, Jerry Box prepared the following production budget for the first

5-12 Preparing a production budget (LO 3) 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.

January

February

March

Quarter

Budgeted sales

20,000

35,000

30,000

85,000

Desired ending inventory

7,000

6,000

2,400

2,400

Kites needed

27,000

41,000

32,400

87,400

Less beginning inventory

4,000

7,000

6,000

4,000

Budgeted production

23,000

34,000

26,400

83,400

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% 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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