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