Raylene Webber, owner of Raylene’s Flowers and Gifts, produces gift baskets for various
special occasions. Each gift basket includes fruit and assorted small gifts (e.g. a coffee mug,
deck of cards, novelty cocoa mixes, scented soap) in a basket that is wrapped in a colorful cellophane. Raylene has estimated the following sales of the standard gift basket for the rest
of this year and the first month of the next financial year.

Month Sales
March 200
April 150
May 180
June 250
July 100

Raylene likes to have 10% of the next month’s sales needs on hand at the end of each month.
This requirement was met on 30 April.

Materials required for each basket are as follows:

Fruit: 1kilograms

Small Gifts 5 items

Cellophane 1 metre (cut from the roll of cellophane)

Basket 1

The materials inventory policy is to have 5% of the next month’s fruit needs on hand as well as
50% of the next month’s production needs for all other materials. (The relatively low inventory
amount for fruit is designed to prevent spoilage).

Materials inventory on 1 March met this company policy.

Required
1.Prepare a production budget for March, April, May and June for the gift baskets.
[4 marks]

2.Prepare a direct material purchases budget for the four type of materials used in the production of gift baskets for the months of match, April and May. (Round all answers the nearest whole unit.) [
16 marks]

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