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Production Budget and Direct Materials Purchases Budgets Peanut Land Inc. produces all-natural organic peanut butter. The...

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 80,000 144,000
February 70,000 126,000
March 50,000 90,000
April 42,000 75,600

Company policy requires that ending inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 37,000 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
January February March Total
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

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

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
Production
Ounces
Ounces for production
Desired ending inventory
Total needs
Less: Beginning inventory
Ounces purchased

I started on it, I am just getting caught up because there are so many numbers. Any help would be appreciated!

Solutions

Expert Solution

Peanut Land Inc. Production Budget for the first quarter of the year

Particulars January February March Total
a. Sales (units) 80000 70000 50000 200000
b. Add: Desired Ending Inventory (15% of next month sales) 10500 7500 6300 24300
(70000 * 0.15) (50000 * 0.15) (42000 * 0.15)
c. Less: Beginning Inventory (Previous month ending inventory) 37000 10500 7500 55000
d. Units Produced (a+b-c) 53500 67000 48800 169300

Peanut Land Inc. Direct Material Purchase Budget for Jars for January and February

Particulars January February Total
a. Production 53500 67000 120500
b. Jar 1 1
c. Jars for Production (a * b) 53500 67000 120500
d. Desired ending inventory (20% of next month's production needs) 13400 9760 23160
(67000 * 0.2) (48800 * 0.2)
e. Total Needs (c + d) 66900 76760 143660
f. Less: Beginning Inventory 10700 13400 24100
(53500 * 0.2) (Prev. month ending inventory)
g. Jars Purchased (e - f) 56200 63360 119560

Peanut Land Inc. Direct Material Purchase Budget for Peanuts for January and February

Particulars January February March Total (Jan & Feb)
a. Production 53500 67000 48800 120500
b. Ounces 24 24 24
c. Ounces for Production (a * b) 1284000 1608000 1171200 2892000
d. Desired ending inventory (20% of next month's production needs) 321600 234240 555840
(1608000 * 0.2) (1171200 * 0.2)
e. Total Needs (c + d) 1605600 1842240 3447840
f. Less: Beginning Inventory 256800 321600 578400
(1284000 * 0.2) (Prev. month ending inventory)
g. Ounces Purchased (e - f) 1348800 1520640 2869440

ekkarill92 answered 6 months ago
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