Exercise $9-41$ Production Budget and Direct Materials Purchases Budget

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 $5$ percent 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 $5$ percent of the next month$$s fruit needs on hand and $30$

percent 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 September $1$ 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.$)$

$3.$ Conceptual Connection: 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?