Question

Jani Subramanian, owner of Jani's Flowers and Gifts, produces gift baskets for various special occasions. Each gift basket includes fruit or assorted small gifts (e.g., a coffee mug, deck of cards, novelty cocoa mixes, scented soap) in a basket that is wrapped in colorful cellophane. Jani has estimated the following unit sales of the standard gift basket for the rest of the year and for January of next year.

September	250
October	200
November	230
December	380
January	100

Jani likes to have 6% of the next month's sales needs on hand at the end of each month. This requirement was met on August 31.

Two materials are needed for each fruit basket:

Fruit	1 pound
Small gifts	6 items

The materials inventory policy is to have 6% of the next month's fruit needs on hand and 30% of the next month's production needs of small gifts. (The relatively low inventory amount for fruit is designed to prevent spoilage.) Materials inventory on August 31 met this company policy.

Required:

1. Prepare a production budget for September, October, November, and December for gift baskets. (Note: Round all answers to the nearest whole unit.)

Jani's Flowers and Gifts
Production Budget for Gift Baskets
For September, October, November, and December
	September	October	November	December
Sales
Desired ending inventory
Needed
Less: Beginning inventory
Production

2. Prepare a direct materials purchases budget for the two types of materials used in the production of gift baskets for the months of September, October, and November. (Note: Round answers to the nearest whole unit.)

Jani's Flowers and Gifts
Direct Materials Purchases Budget
For September, October, and November
Fruit:	September	October	November
Production
Pounds of fruit
Required for production
Desired ending inventory
Total needs
Less: Beginning inventory
Pounds purchased
Small gifts:
Production
Items required
Needed for production
Desired inventory
Total needs
Less: Beginning inventory
Items purchased

3. Why do you think there is such a big difference in budgeted units from November to December? Why did Jani budget fewer units in January than in December?

1. December includes the holiday season and is a time when many gifts are given, January is a month of fewer gift giving occasions.
2. December is the last month of the year so Jani has too budget all the balance units in her Annual budget to meet her targets.
3. None of the above.

Answer 1

PRODUCTION BUDGET
			Sep	Oct	Nov	Dec
Budgeted Sales Units		250	200	230	380
Add: Desired Ending Finished inventory	12	14	23	6
Total Needs		262	214	253	386
Less: Beginning Finished Inventory	15	12	14	23
Required Production in units	247	202	239	363
RAW MATERIAL PURCHASE BUDGET
FRUIt			Sep	Oct	Nov	Dec
Budgeted Production units	247	202	239	363
RM required per unit		1	1	1	1
Total RM requiremnt		247	202	239	363
Add: Desired Ending Inventory	12	14	22
Total needs		259	216	261
Less: Beginning Inventory	15	12	14
Purchase Units		244	204	247
Small Gifts		Sep	Oct	Nov	Dec
Budgeted Production units	247	202	239	363
RM required per unit		6	6	6	6
Total RM requiremnt		1,482	1,212	1,434	2,178
Add: Desired Ending Inventory	364	430	653
Total needs		1,846	1,642	2,087
Less: Beginning Inventory	445	364	430
Purchase Units		1,401	1,278	1,657
Req 3.
Answer is 1. December includes the holiday season and is a time when many gifts are given. January is a month of fewer gift giving occasion