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 84,000 40,000 75,000 February March 80,000 66,000 157,500 168,000 138,600 April Company policy requires that ending inventories for each month be 20% of next month's sales. At the beginning of January, the inventory of peanut butter is 35,000 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: January 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 February March Total Sales 40,000 75,000 80,000 195,000 Desired ending inventory 15,000 1 16,000 13,200 44,200 X Total needs 55,000 91,000 93,200 239,200 Less: Beginning inventory 35,000 15,000 16,000 66,000 Units produced 20,000 76,000 1 77,200 173,200 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 20.000 76,000 96,000 20,000 76,000 96,000 Jars for production Desired ending inventory Total needs Less: Beginning inventory Jars purchased Feedback Check My Work 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 Production 20,000 76,000 96,000 Ounces 24 24 Ounces for production 480,000 1,824,000 96,000 x Total Desired ending inventory Total needs Less: Beginning inventory Ounces purchased