Diane Buswell is preparing the 2025 budget for one of Current Designs rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2025 and preliminary sales projections for 2026.
	2025:	Quarter 1	1,000	kayaks
		Quarter 2	1,500	kayaks
		Quarter 3	750	kayaks
		Quarter 4	750	kayaks
	2026:	Quarter 1	1,100	kayaks
		Quarter 2	1,500	kayaks
Current Designs policy is to have finished goods ending inventory in a quarter equal to 20% of the next quarters anticipated sales. Ending inventory of finished goods at December 31, 2024, will be 200 rotomolded kayaks.
Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2024, is 19,400 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.50 per pound, and the finishing kits cost $170 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type II employees. The type I employees are paid $15 per hour, and the type II employees are paid $12 per hour.
Selling and administrative expenses for this line are expected to be $45 per unit sold plus $7,500 per quarter. Manufacturing overhead is assigned at 150% of labor costs. The cost and production data in tabular form are presented here.
	Desired ending inventory of polyethylene powder		25%	of next month's production
	Desired ending inventory of finished units		20%	of next month's unit sales
	Estimated inventories
	Finished goods inventory at Dec. 31, 2024		200	kayaks
	Polyethylene powder at Dec. 31, 2024		19,400	pounds
	Polyethylene powder at Dec. 31, 2024		15,930	pounds
	Production requirements
	Polyethylene powder		54	pounds
	Finishing kit		1	kit
	Type I employees labor time		2	hours
	Type II employees labor time		3	hours
	Manufacturing overhead		150%	of direct labor costs
	Cost of polyethylene powder		$ 1.50	per pound
	Cost of finishing kits		170.00	per kit
	Labor rate of type I employees		15.00	per hour
	Labor rate of type II employees		12.00	per hour
	Selling and administrative expenses		45.00	per unit sold
	Selling and administrative expenses		7,500	per quarter
Instructions
Prepare the production budget, direct materials budget, direct labor budget, manufacturing overhead budget, and selling and administrative budget for this product line by quarter and in total for 2025.
What-if Question
Perform what-if analysis to answer the following:
Suppose the sales in units for the third quarter are now estimated to be 1,200 units. Adjust the budgets to reflect these changes.