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 3,000 units of Fineclay plus 15% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 10,000 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 54,000 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: Budgeted Sales in Units 35,000 40,000 50,000 30,000 20,000 10,000 July August September October November December

Answer 1

			Daisy Products Limited
			Production Budget
			July	August	September	October
Budgeted sales (units)			35,000	40,000	50,000	30,000
Add:Desired ending inventory			9000	10500	7500	6000
Total needs			44,000	50,500	57,500	36,000
Deduct:Beginning inventory			10,000	9000	10500	7500
Required production			34,000	41,500	47,000	28,500
		Raw Materials Purchase Budget
			July	August	September	third Qtr
production needs			102,000	124,500	141,000	367,500
Add:Desired ending inventory			62250	70500	42750	42750
Total solvent Q80 needs			164,250	195,000	183,750	410,250
deduct:Beginning inventory			51000	62250	70500	51000
Solvent Q80 purchases (CC)			113,250	132,750	113,250	359,250