2. Prepare a production budget for Little Bo Peep Limited.

Direct Materials Purchases Budget Information

Each unit of product requires 1.5 pounds of direct materials per unit, and the cost of direct materials is $2 per pound. Management prefers to maintain ending raw materials inventory equal to 30 percent of next quarters materials needed in production. Assume raw materials inventory at the end of the fourth quarter budget period is estimated to be 41,000 pounds.

1. Prepare a direct materials purchases budget.

Little Bo Peep Limited produces cup cakes for resale to schools in Jamaica. The company is currently in the process of establishing a master budget on a quarterly basis for this coming fiscal year, which ends December 31, 2020. Quarterly sales for 2019 were as follows (1 unit = 1 batch): 64,000 First quarter units Second quarter 76,800 units 96,000 units Third quarter 83,200 units Fourth quarter Unit sales are expected to increase 20 percent, and each unit is expected to sell for $8. The management prefers to maintain ending finished goods inventory equal to 10 percent of next quarter's sales. Assume finished goods inventory at the end of the fourth quarter budget year is estimated at 9,000 units. 1. Prepare a sales budget for Little Bo Peep Limited. (Hint: be sure to increase last year's unit sales by 20 percent.)