Exercise 9-36

Peanut-Fresh 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	Dolar Sales($)
January	48,000	100,800
February	46,000	96,600
March	55,000	121,000
April	58,000	125,200

Company policy requires that ending inventories for each month be 20% of next months sales. At the beginning of January, the inventory of peanut butter is 14,500 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 10% of the next months 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.

2. Prepare separate direct materials purchases budgets for jars and for peanuts for the months of January and February.