Question

Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia Three cubic centimetres (CC) of solvent Q80 are required to manufacture each unit of Fineclay, one of the company's products. The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Fineclay occur. To keep production and sales moving smoothly, the company has the following inventory requirements: a. The finished goods inventory on hand at the end of each month must be equal to 2,400 units of Fineclay plus 15% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 8,000 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 43,200 cc of solvent Q80. c. The company maintains no work-in-process inventories. A sales budget for Fineclay for the last six months of the year follows: July August September October November December Budgeted Sales in Units 28,000 32,000 40,000 24,000 16,000 8,000 Required: 1. Prepare a production budget for Fineclay for the months of July to October. DAISY PRODUCTS LIMITED Production Budget July August September October Total needs

Answer 1

Answer to Question 1:

Question 1 Budgeted Unit Sales Add: Closing Inventory July August September 28,000 32,000 40,000 7,200 8,400 6,000 (32,000 X 15%) (40,000 X 15%) (40,000 X 15%) +2,400 +2,400 +2,400 35,200 40,400 46,000 (28,000 + 7,200) (32,000 + 8,400) (40,000 + 6,000) 8,000 7,200 8,400 October 24,000 4,800 (16,000 X 15%) +2,400 28,800 (24,000 + 4,800) 6,000 Calculation Total needs Calculation Less: Opening Inventory Required production in units Calculation 27,200 33,200 37,600 (35,200 - 8,000) (40,400 - 7,200) (46,000 -8,400) 22,800 (28,800 - 6,000)

Answer to Question 3:

Question 3 July August September Quarter 27,200 33,200 37,600 98,000 Required production in units Number of cc Solvent Q80 required (in cc) Calculation Add: Ending Inventory Calculation Less: Opening Inventory Total cc Q80 to be purchased 81,600 (27,200 X 3) 49,800 (99,600 X 1/2) 43,200 99,600 (33,200 X 3) 56,400 (112,800 X 1/2) 49,800 112,800 (37,600 X 3) 34,200 (22,800 X 3) X 1/2) 56,400 294,000 (98,000 X 3) 34,200 43,200 88,200 106,200 90,600 285,000 (81,600 + 49,800 (99,600 + 56,400 (112,800 + 34,200 (294,000 + - 43,200) - 49,800) 56,400) 34,200 - 43,200) Calculation