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 50,000 110,000 February 65,000 143,000 March 60,000 132,000 April 46,000 101,200 Company policy requires that ending inventories for each month be 10% of next month's sales. At the beginning of January, the inventory of peanut butter is 33,000 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 Sales 50,000 65,000 60,000 175,000 Desired ending 6,500 6,000 4,600 1,710 inventory Total 56,500 7 1,000 64,600 19.210 X needs Less: Beginning 33,000 6,500 6,000 4,550 inventory Units 23,500 64,500 58,600 146,600 produced 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 23,500 64,500 88,000 Jar 1 1 23,500 64,500 8 8,000 12,900 11,720 24,620 X Jars for production Desired ending inventory Total needs Less: Beginning inventory Jars purchased 36,400 76,220 112,620 X 4.700 12,900 17,600 X 31,700 63,320 95,020