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 4 months of the year is as follows: Unit Sales Dollar Sales ($) January 36,000 108,000 February 38,000 114,000 March 41,000 123,000 April 43,000 129,000 Company policy requires that ending inventories for each month be 25% of next months sales. At the beginning of January, the inventory of peanut butter is 9,300 jars. Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar set (a glass jar and lid). 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. Peanut Land Inc. Production Budget For the First Quarter of the Year January February March Total Sales 42,700 Desired ending inventory Total needs Less: Beginning inventory Units produced Feedback 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. 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 Number of Jars Jars for production Desired ending inventory Total needs Less: Beginning inventory Jars purchased Feedback 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 Production Ounces Ounces for production Desired ending inventory Total needs Less: Beginning inventory Ounces purchased