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: January February March April Unit Sales 70,000 75,000 60,000 66,000 Dollar Sales ($) 133,000 142,500 114,000 125,400 Company policy requires that ending inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 36,000 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 For the First Quarter of the Year February March Total Sales 70,000 75,000 60,000 205,000 Desired ending inventory 11,250 9,000 9,900 9,900 Total needs 81,250 84,000 69,900 214,900 Less: Beginning inventory 36,000 11,250 9,000 36,000 Units produced 45,250 72,750 60,900 178,900 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 Production Jar January February Total 45,250 72,750 118,000 1 1 1 Jars for production 45,250 72,750 118,000 Desired ending inventory 14,550 12,180 12,180 Total needs 59,800 84,930 130,180 Less: Beginning inventory 14,550 Jars purchased 70,380 Jar 1 1 1 Jars for production 45,250 72,750 118,000 Desired ending inventory 14,550 12,180 12,180 Total needs 59,800 84,930 130,180 Less: Beginning inventory 14,550 Jars purchased 70,380 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 Production Ounces Ounces for production Desired ending inventory Total needs Less: Beginning inventory Ounces purchased January February Total 45,250 72,750 118,000 24 24 24