Question
In: Accounting
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
Jan78,000
Feb56,000
Mar65,000
Apr59,000
May62,000
Jun58,000
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.
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