Rani Lopez owner of Rani Flowers and Gifts produces gift baskets for various special occasions. Each gift basket includes fruit or assorted small gifts (e.g. a coffee mug, deck of cards, novelty cocoa mixes and scented soap) in a basket that is wrapped in colorful cellophane.

Rani has estimated the following unit sales of the standard gift basket for the rest of the year and for January of next year.

	Units
September	250
October	200
November	230
December	380
January	100

Rani likes to have 5% of the next months sales needs on hand at the end of each month. This requirement was met on August 31.

Two materials are needed for each gift basket:

Fruits 1 kg

Small gifts 6 items

The materials inventory policy is to have 5% of the next months fruit needs on hand and 30% of the next months production needs of small gifts. Materials inventory on September 1 met this company policy.

Required:

(a) Prepare a production budget for September, October, November and December for gift basket. (Note: Round all answers to the nearest whole unit). (6 marks)

(b) Prepare a direct materials purchases budget for the two types of materials used in production of gift basket for months of September, October and November. (Note: Round all answers to the nearest whole unit). (15 marks)

(c) Why do you think there is such a big difference in budgeted units from November to December? Why did Rani budget fewer units in January than December? (6 marks)