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

60,000

126,000

February

70,000

147,000

March

40,000

84,000

April

58,000

121,800

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 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.make 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

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Desired ending inventory

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Total needs

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Less: Beginning inventory

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Units produced

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2.make 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

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Jar

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Jars for production

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Desired ending inventory

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Total needs

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Less: Beginning inventory

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Jars purchased

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make 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

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Ounces

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Ounces for production

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Desired ending inventory

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Total needs

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Less: Beginning inventory

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Ounces purchased

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