Production Budget and Direct Materials Purchases Budgets
Peanut Land Inc. produces all-natural organic peanut butter. Thepeanut butter is sold in 12-ounce jars. The sales budget for thefirst four months of the year is as follows:
| Unit Sales | Dollar Sales ($) |
| January | 70,000 | 140,000 |
| February | 45,000 | 90,000 |
| March | 60,000 | 120,000 |
| April | 54,000 | 108,000 |
Company policy requires that ending inventories for each monthbe 15% of next month's sales. At the beginning of January, theinventory of peanut butter is 33,000 jars.
Each jar of peanut butter needs two raw materials: 24 ounces ofpeanuts and one jar. Company policy requires that endinginventories of raw materials for each month be 20% of the nextmonth's production needs. That policy was met on January 1.
Required:
1. Prepare a production budget for the firstquarter of the year. Show the number of jars that should beproduced each month as well as for the quarter in total.
| Peanut Land Inc. |
| Production Budget |
| For the First Quarter of theYear |
| January | February | March | Total |
| Sales | | | | |
| Desired ending inventory | | | | |
| Total needs | | | | |
| Less: Beginning inventory | | | | |
| Units produced | | | | |
2. Prepare a direct materials purchases budgetfor jars for the months of January and February.
| Peanut Land Inc. |
| Direct Materials Purchases Budget forJars |
| For January and February |
| January | February | Total |
| Production | | | |
| Jar | | | |
| Jars for production | | | |
| Desired ending inventory | | | |
| Total needs | | | |
| Less: Beginning inventory | | | |
| Jars purchased | | | |
Prepare a direct materials purchases budget for peanuts for themonths of January and February.
| Peanut Land Inc. |
| Direct Materials Purchases Budget forPeanuts |
| For January and February |
| January | February | Total |
| Production | | | |
| Ounces | | | |
| Ounces for production | | | |
| Desired ending inventory | | | |
| Total needs | | | |
| Less: Beginning inventory | | | |
| Ounces purchased | | | |
