eBook

Question Content Area

Production Budget and Direct Materials Purchases Budgets

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

Month	Unit Sales
January	80,000
February	75,000
March	40,000
April	54,000

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 34,000 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 20% of the next month's production needs. That policy was met on January 1.

Question Content Area

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.

Line Item Description	January	February	March	Total
Sales	Sales	Sales	Sales	Sales
Desired ending inventory	Desired ending inventory	Desired ending inventory	Desired ending inventory	Desired ending inventory
Total needs	Total needs	Total needs	Total needs	Total needs
Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory
Units produced	Units produced	Units produced	Units produced	Units produced

Question Content Area

2. Prepare a direct materials purchases budget for bottles for the months of January and February. Round all calculations to the nearest whole number.

Line Item Description	January	February	Total
Production	Production	Production	Production
Bottles	Bottles	Bottles	Bottles
Bottles for production	Bottles for production	Bottles for production	Bottles for production
Desired ending inventory	Desired ending inventory	Desired ending inventory	Desired ending inventory
Total needs	Total needs	Total needs	Total needs
Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory
Bottles purchased	Bottles purchased	Bottles purchased	Bottles purchased

Question Content Area

Prepare a direct materials purchases budget for salicylic acid and water mixture for the months of January and February. Round all calculations to the nearest whole number.

Line Item Description	January	February	Total
Production	Production	Production	Production
Ounces	Ounces	Ounces	Ounces
Ounces for production	Ounces for production	Ounces for production	Ounces for production
Desired ending inventory	Desired ending inventory	Desired ending inventory	Desired ending inventory
Total needs	Total needs	Total needs	Total needs
Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory	Less: Beginning inventory
Ounces purchased	Ounces purchased	Ounces purchased	Ounces purchased