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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 sales budget for the first four months of the year is as follows: Unit Sales Dollar Sales ($) January 80,000 152,000 February 45,000 85,500 March 70,000 133,000 April 58,000 110,200 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 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. 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 58,000 50,000 108,000 Production Jar 1 Jars for production 58,000 50,000 108,000 Desired ending inventory 10,000 13,520 23,520 Total needs 68,000 131,520 Less: Beginning inventory 11,600 63,520 - 10,000 53,520 -21,600 Jars purchased 56,400 109,920 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 Total 58,000 50,000 108,000 24 1 24 Production Ounces 24 Ounces for production 1,392,000 1,200,000 2,592,000 Desired ending inventory 240,000 324,480 564,480 Total needs 1,632,000 1,524,480 3,156,480 Less: Beginning inventory -278,400 -240,000 -518,400 Ounces purchased 1,353,600 1,284,480 2,638,080

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