Question

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company's products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix 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 equal 4,000 units of Supermix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 15,250 units. b. The raw materials inventory on hand at the end of each month must equal one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 69,375 cc of solvent H300. c. The company maintains no work in process inventories. A monthly sales budget for Supermix for the third and fourth quarters of the year follows. July August September October November December Budgeted Unit Sales 45,000 50,000 60,000 40,000 30,000 20,000 Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October. 3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.

Answer 1

preparation op praductio beudget manths July tAugust 6eptember acteber Budgeted sales Desived ending 45000 50 0o0 C01000 401000 Gventery L4000-t2 o heat mosth sales 16S00 900O U500 Beginrsng Gnuentery poduction 15250650o 46250 5250055000 19000 I4000 33500

preparation af direct materials budget mpnths July taugust September Total 55000 Preduction 46250 52oo Supermgit vequired of t1300 Rauo material needed Ror producton desived enaing ventary C51832 50056250 f nextmoth) I38750 157500 LGS00O egiening Guentery Ravo moteria to be purchased Ga335 78=50 82500 148125/ 161250133750448125