Pets Plus, Inc. produces otic fluid for dogs. The otic fluid is sold in 12-ounce plastic bottles. The sales budget for the first 4 months of the year is as follows:

Company policy requires that ending inventories for each month be 15% of next month’s sales. 

At the beginning of January, the inventory of otic fluid is 900 bottles. 

Each bottle of otic fluid needs two raw materials: eight ounces of a mix of salicylic acid and water and one plastic bottle. Company policy requires that ending inventories of raw materials for each month be 10% of the next month’s production needs. That policy was met on January 1.

Required:

1. Prepare a production budget for the first quarter of the year. Show the number of bottles that should be produced each month as well as for the quarter in total. 

2. Prepare separate direct materials purchases budgets for bottles and for salicylic acid and water mixture for the months of January and February. Round all calculations to the nearest whole number.

Transcribed Image Text:

January February March April Unit Sales 8,000 9,500 12,000 13,900