DO IT! 24.2 (LO 2) Pargo Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 25%, 25%, and 30%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $45 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 20% higher than the budgeted sales for the first quarter of 2020.

Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarters budgeted sales volume.

Direct materials. Each unit requires 2 pounds of raw materials at a cost of $12 per pound. Manage- ment desires to maintain raw materials inventories at 10% of the next quarters production require- ments. Assume the production requirements for first quarter of 2021 are 450,000 pounds.

Prepare the sales, production, and direct materials budgets by quarters for 2020.