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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
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 February March April 40,000 70,000 60,000 62,000 76,000 133,000 114,000 117,800 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 31,000 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 Sales 40,000 70,000 Desired ending inventory 12,750 X March Total 60,000 170,000 Total needs Less: Beginning inventory Units produced
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