Explain Production Budget and Direct Materials Purchases Budget

Jani Subramanian, owner of Jani's Flowers and Gifts, produces gift baskets for various special occasions. Each gift basket includes fruit or assorted small gifts (e.g., a coffee mug, deck of cards, novelty cocoa mixes, scented soap) in a basket that is wrapped in colorful cellophane. Jani has estimated the following unit sales of the standard gift basket for the rest of the year and for January of next year.

September250October200November230December380January100

Jani likes to have 5% of the next month's sales needs on hand at the end of each month. This requirement was met on August 31.

Two materials are needed for each fruit basket:

Fruit1 poundSmall gifts6 items

The materials inventory policy is to have 5% of the next month's fruit needs on hand and 30% of the next month's production needs of small gifts. (The relatively low inventory amount for fruit is designed to prevent spoilage.) Materials inventory on August 31 met this company policy.

Required:

1. Explain a production budget for September, October, November, and December for gift baskets. (Note: Round all answers to the nearest whole unit.)

Jani's Flowers and GiftsProduction Budget for Gift BasketsFor September, October, November, and December September October November December

Sales

Desired ending inventory

NeededLess: Beginning inventory

Production

2.Explain a direct materials purchases budget for the two types of materials used in the production of gift baskets for the months of September, October, and November. (Note: Round answers to the nearest whole unit.)

Jani's Flowers and Gifts Direct Materials Purchases Budget For September, October, and November

Fruit: September October November

Production

Pounds of fruit

Required for production

Desired ending inventory

Total needs

Less: Beginning inventory

Pounds purchased

Small gifts:

Production

Items required

Needed for production

Desired inventory

Total needs

Less: Beginning inventory

Items purchased

3. Why do you think there is such a big difference in budgeted units from November to December? Why did Jani budget fewer units in January than in December?

1. December includes the holiday season and is a time when many gifts are given, January is a month of fewer gift giving occasions.
2. December is the last month of the year so Jani has too budget all the balance units in her Annual budget to meet her targets.
3. None of the above.