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

Unit Sales Dollar Sales ($)

January 70,000 126,000
February 65,000 117,000
March 40,000 72,000
April 50,000 90,000

Company policy requires that ending inventories for each month be 10% of next month's sales. At the beginning of January, the inventory of peanut butter is 34,000 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.

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

Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

January February March Total

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

Production
Jar
Jar for production
Desired Ending inventory
Total needs
Less: Beginning Inventory
Jars purchased

January February Total

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

Production
Ounces
Ounces for production
Desired ending inventory
Total needs
Less: beginning inventory
Ounces Purchased

January February Total