529 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 ($) January 80,000 144,000 February 85,000 153,000 March 60,000 108,000 April 46,000 82,800 Company policy requires that ending inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 33,000 jars. Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar. Company policy requires that ending inventories of raw materials for each month be 20% of the next month's production needs. That policy was met on January 1. Required: 1. Prepare a production budget for the first quarter of the year. Show the number of jars that should be produced each month as well as for the quarter in total. Peanut Land Inc. Production Budget For the First Quarter of the Year January February March Total Sales Desired ending inventory Total needs Less: Beginning inventory Units produced
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
529 Production Budget and Direct Materials Purchases Budgets
Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows:
| Unit Sales | Dollar Sales ($) | |
| January | 80,000 | 144,000 |
| February | 85,000 | 153,000 |
| March | 60,000 | 108,000 |
| April | 46,000 | 82,800 |
Company policy requires that ending inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 33,000 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 | ||||
| Desired ending inventory | ||||
| Total needs | ||||
| Less: Beginning inventory | ||||
| Units produced |
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 | |||
| Jar | |||
| Jars for production | |||
| Desired ending inventory | |||
| Total needs | |||
| Less: Beginning inventory | |||
| Jars purchased |
3. 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 | |||
| Ounces | |||
| Ounces for production | |||
| Desired ending inventory | |||
| Total needs | |||
| Less: Beginning inventory | |||
| Ounces purchased |
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