Question

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Production Budget and Direct Materials Purchases Budgets Peanut Land Inc. produces all-natural organic peanut butter. The...

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 40,000 80,000
February 75,000 150,000
March 70,000 140,000
April 66,000 132,000

Company policy requires that ending inventories for each month be 20% of next month's sales. At the beginning of January, the inventory of peanut butter is 35,000 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.

Required:

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 fill in the blank 071f92028f87071_1 fill in the blank 071f92028f87071_2 fill in the blank 071f92028f87071_3 fill in the blank 071f92028f87071_4
Desired ending inventory fill in the blank 071f92028f87071_5 fill in the blank 071f92028f87071_6 fill in the blank 071f92028f87071_7 fill in the blank 071f92028f87071_8
Total needs fill in the blank 071f92028f87071_9 fill in the blank 071f92028f87071_10 fill in the blank 071f92028f87071_11 fill in the blank 071f92028f87071_12
Less: Beginning inventory fill in the blank 071f92028f87071_13 fill in the blank 071f92028f87071_14 fill in the blank 071f92028f87071_15 fill in the blank 071f92028f87071_16
Units produced fill in the blank 071f92028f87071_17 fill in the blank 071f92028f87071_18 fill in the blank 071f92028f87071_19 fill in the blank 071f92028f87071_20

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 fill in the blank 1e1f0e089016ff2_1 fill in the blank 1e1f0e089016ff2_2 fill in the blank 1e1f0e089016ff2_3
Jar fill in the blank 1e1f0e089016ff2_4 fill in the blank 1e1f0e089016ff2_5 fill in the blank 1e1f0e089016ff2_6
Jars for production fill in the blank 1e1f0e089016ff2_7 fill in the blank 1e1f0e089016ff2_8 fill in the blank 1e1f0e089016ff2_9
Desired ending inventory fill in the blank 1e1f0e089016ff2_10 fill in the blank 1e1f0e089016ff2_11 fill in the blank 1e1f0e089016ff2_12
Total needs fill in the blank 1e1f0e089016ff2_13 fill in the blank 1e1f0e089016ff2_14 fill in the blank 1e1f0e089016ff2_15
Less: Beginning inventory fill in the blank 1e1f0e089016ff2_16 fill in the blank 1e1f0e089016ff2_17 fill in the blank 1e1f0e089016ff2_18
Jars purchased fill in the blank 1e1f0e089016ff2_19 fill in the blank 1e1f0e089016ff2_20 fill in the blank 1e1f0e089016ff2_21

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 fill in the blank 22b01f050077067_1 fill in the blank 22b01f050077067_2 fill in the blank 22b01f050077067_3
Ounces fill in the blank 22b01f050077067_4 fill in the blank 22b01f050077067_5 fill in the blank 22b01f050077067_6
Ounces for production fill in the blank 22b01f050077067_7 fill in the blank 22b01f050077067_8 fill in the blank 22b01f050077067_9
Desired ending inventory fill in the blank 22b01f050077067_10 fill in the blank 22b01f050077067_11 fill in the blank 22b01f050077067_12
Total needs fill in the blank 22b01f050077067_13 fill in the blank 22b01f050077067_14 fill in the blank 22b01f050077067_15
Less: Beginning inventory fill in the blank 22b01f050077067_16 fill in the blank 22b01f050077067_17 fill in the blank 22b01f050077067_18
Ounces purchased fill in the blank 22b01f050077067_19 fill in the blank 22b01f050077067_20 fill in the blank 22b01f050077067_21

Solutions

Expert Solution

1. Production budget for the first quarter of the year

January February March Total
Sales 40,000 75,000 70,000 185,000
Desired ending Inventory 15,000 (75,000*20%) 14,000 (70,000*20% 13,200 (66,000*20%) 42,200
Total Needs 55,000 89,000 83,200 227,200
Less:-Beginning Inventory 35,000 15,000 14,000 64,000
Units Produced 20,000 74,000 69,200 163,200

2. Direct materials purchases budget for jars for the months of January and February

January February Total
Production 20,000 74,000 94,000
Jar 1 1 1
Jars for Production 20,000 74,000 94,000
Desired ending Inventory 14,800 (74,000*20%) 13,840 (69,200*20%) 28,640
Total Needs 34,800 87,840 122,640
Less:- Beginning Inventory - 14,800 14,800
Jars Purchased 34,800 73,040 107,840

3.Direct materials purchases budget for peanuts for the months of January and February.

January February Total
Production 20,000 74,000 94,000
Ounces 24 24 24
Ounces for Production 480,000 1,776,000 2,256,000
Desired ending Inventory 355,200 (1,776,000*20%) 332,160 (1,660,800*20%) 687,360
Total Needs 835,200 2,108,160 2,943,360
Less:- Beginning Inventory - 355,200 355200
Ounces Purchased 835,200 1,752,960 2,588,160

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