Reference no: EM132873382

Problem - 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. 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: The materials inventory policy is to have 5% 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.

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.

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?