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3. Happy Peanut Inc. produces all-natural organic peanut can. The sales budget for the first six...

3. Happy Peanut Inc. produces all-natural organic peanut can. The sales budget for the first six months of the year are as follows:

​​

No. of Can Sales ​​

​​Jan​​78,000

Feb​​56,000​

​​Mar​​65,000​​

​​Apr​​59,000

​​May​​62,000

​​Jun​​58,000​

​

Company policy requires that ending inventories for each month be 15% of the next month’s sales. At the beginning of Jan, the inventory of peanut is 14,500 cans. Each can of peanut needs 20 ounces of peanuts. Company’s policy requires that ending inventories of raw materials for each month be 10% of the next month’s production needs. At the beginning of Jan, the inventories of peanuts are 130,000 ounces.

3.1 Prepare a production budget for the first quarter of the year. Show the number of peanut cans that should be produced each month as well as for the quarter in total.​​​​​​​​

3.2 Prepare separate direct materials purchased budgets for raw peanuts of each month as well as for the quarter in total.

Solutions

Expert Solution

3.1 Production budget of peanut cans for the first quarter.

Particulars

January

(1)

February

(2)  

March

(3)

First Quarter

(1+2+3)
A. Sales 78,000 56,000 65,000 1,99,000

B. Closing inventory

(NOTE :1)

 8,400 9,750 8,850 27,000

C. Opening inventory

(NOTE :2)

 14,500 8,400 9,750 32,650

D. Production for the month

(D=A+B-C)

 71,900 57,350 64,100 1,93,350

Note 1: Closing Inventory of the current month is 15% of next month's sales.

Note 2: Opening Inventory of January is given in the question. For the other months, closing inventory of the previous month is opening inventory of current month.

3.2 Purchase budget for raw peanuts for each month & the quarter.

Particulars January February March First quarter
A. No of cans produced 71, 900 57,350 64,100 1,93,350

B. Raw material required

(B=A. * 20)

 14,38,000 11,47,000 12,82,000 38,67,000

C. Opening Inventory

(Note : 3)

 1,30,000 1,14,700 1,28,200 3,72,900

D. Closing Inventory

( Note : 4)

 1,14,700 1,28,200 1,18,900 3,61,800

E. Purchase for the month

(E= B-C+D)

 14,22,700 11,60,500 12,72,700 38,55,900

Note 3: Opening Inventory for January is given in question. For the other months, closing inventory of the previous month is the opening inventory of the current month.

Note 4: Closing Inventory of the current month is 10% of next month's production.

ekkarill92 answered 1 week ago
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