Question 2 Pargo Company is preparing its budgeted income statement for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,100,000 units. Quarterly sales are 22%, 27%, 24%, and 27%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $47 per unit beginning in the fourth quarter. sales in the first quarter of 2018 are expected to be 15% higher than the budgeted sales for the first quarter of 2017. Production, Management desires to maintain the ending finished goods inventories at 18% of the next quarter's budgeted sales volume. Direct materials. Each unit requires 2 pounds of raw materials at a cost of $9 per pound. Management desires to maintain raw materials inventories at 20% of the next quarter's production requirements. Assume the production requirements for first quarter of 2018 are 493,000 pounds. Pargo budgets 0.4 hours of direct labor per unit, labor costs at $11 per hour, and manufacturing overhead at $17 per direct labor hour. Its budgeted selling and administrative expenses for 2017 are $6,998,000