Calculator Print item Production Budget and Direct Materials Purchases Budgets Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows: Unit Sales Dollar Sales ($) January 40,000 88,000 February 70,000 154,000 March 80,000 176,000 April 46,000 101,200 Company policy requires that ending Inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 34,000 jars. Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar. Company policy requires that ending inventories of raw materials for each month be 20% 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 jars that should be produced each month as well as for the quarter in total Peanut Land Inc. Production Budget For the First Quarter of the Year January February March Total 40,000 70,000 10,000 190,000 1. Prepare a production budget for the first quarter of the year. Show the number of jars that should be produced each month as well as for the quarter in total Peanut Land Inc. Production Budget For the First Quarter of the Year January February March Total Sales 40,000 70.000 70 0 00 Desired ending Inventory 10,500 12,000 Total needs 50,500 34.000 Less: Beginning inventory 10,500 12,000 Units produced 16,500 71,500 74.000 162.900 Check My Wor The production budget is in units. Fill in the units for sales from the amounts provided. The desired ending Inventory is added to the number of units to be produced and is calculated based on future sales. Beginning inventory is subtracted to determine units to be produced. Beginning inventory is given for the first month and is carried forward from the previous month for later months. Review the "How to Prepare a Production Budget" example in the text. Calculator Print Item 2. Prepare a direct materials purchases budget for jars for the months of January and February Peanut Land Inc. Direct Materials Purchases Budget for Jars For January and February January February Total Production 16,500 71,500 88,000 Jar Jars for production 16,500 88,000 71,500 14,300 Desired ending inventory X x Total needs 14,300 30,800 34,000 30800 85,800 14,300 14,300 102,300 34,000 x X X Less: Beginning inventory X Jars purchased X 73,200 X 104,000 Feedback Check My Work Fill in the units produced from Requirement 1. Production in units x Materials per unit - Direct Materials Needed for Production Pillem Prepare a direct materials purchases budget for peanuts for the months of January and February Peanut Land Inc. Direct Materials Purchases Budget for Peanuts For January and February January February Total 16,500 71,500 88,000 24 Production Ounces Ounces for production 1,716,000 2,112,000 396,000 343,200 Desired ending inventory Total needs Less: Beginning inventory Ounces purchased Feedback
