Question

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!

Answer 1

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