In Waterway Corporation's first year of operations, inadequate budgeting led to significant cost overruns in multiple production areas. Direct materials needed to be express-delivered, and laborers needed to be overtime because reasonable budgets weren't in place, nor were managers properly trained on how to use them. If adequate budgeting had been done, the company might have achieved its objectives that year. As year one comes to a close, all managers are now committed to creating and using accurate budgets for next year so they can properly plan for the resources to support production. The following information is in place to assist the management team in budgeting for year 2. Year 2 Year 3 Q1 Q2 Q3 Q4 Q1 Q2 Budgeted sales volume 5,200 6,400 5,000 5,800 6,100 6,100 Additional information: 1. Budgeted selling price is $80/unit. 2. Desired ending FG Inventory is 25% of the following quarter's sales volume. 3. Beginning FG Inventory on January 1 of Year 2 is expected to be just 800 units. 4. Each unit requires 3 pounds of DM at an estimated cost of $4/pound. 5. Desired ending DM Inventory is 20% of the following quarter's production needs. 6. Each unit requires 1.2 DL hours