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 5% 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 5% of the next month's fruit needs on hand and 35% 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.) 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.)

Answer 1

Solution 1:

Production Budget in Units
Particulars	September	October	November	December
Expected sales units	250	200	230	380
Add: ending inventory (5% of next month sales)	10	12	19	5
Less: Beginning inventory	13	10	12	19
Estimated production units for gift baskets	247	202	237	366

Solution 2:

Budgeted raw material purchases - Fruits
Particulars	September	October	November
Budgeted Production units	247	202	237
Fruits per fruit basket	1	1	1
Estimated consumption of fruits in pound	247	202	237
Add: desired ending inventory (5% of next month production needs)	10	12	18
Less: Beginning inventory	12	10	12
Budgeted purchase units of Fruit	245	204	243

Budgeted raw material purchases - Small Gifts
Particulars	September	October	November
Budgeted Production units	247	202	237
Small Gifts per fruit basket	6	6	6
Estimated consumption of gift items	1482	1212	1422
Add: desired ending inventory (35% of next month production needs)	424	498	769
Less: Beginning inventory	519	424	498
Budgeted purchase units of gift items	1387	1286	1693