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

Production Budget
	July	August	September	October	November	December
Budgeted Sales	28,000	32,000	40,000	24,000	16,000	8,000
Add: Desired Ending Inventory	7,200	8,400	6,000	4,800	3,600
Total Required	35,200	40,400	46,000	28,800	19,600
Less: Beginning Inventory	8,000	7,200	8,400	6,000	4,800
Required Production	27,200	33,200	37,600	22,800	14,800
Direct Material Budget
	July	August	September	Total
Required Production	27,200	33,200	37,600	98,000
Material Per unit	3	3	3	3
Raw material required for production	81,600	99,600	112,800	294,000
Add: Desired Ending Inventory	49,800	56,400	34,200	34,200
Total Required	131,400	156,000	147,000	328,200
Less: Beginning Inventory	43,200	49,800	56,400	43,200
Raw material to be purchased	88,200	106,200	90,600	285,000

А D E F 1 Production Budget 2 3 Budgeted Sales 4. Add: Desired Ending Inventory 5 Total Required 6 Less: Beginning Inventory 7 Required Production July August September October November December 28000 32000 40000 24000 16000 8000 =2400+15%*C3 =2400+15%*D3 =2400+15%*£3 =2400+15%*F3 =2400+15%*G3 =SUM(B3:34) ESUM(C3:04 =SUM(D3:04) =SUM(E3:E4) =SUM(F3:F4) 8000 =B4 =C4 =D4 =E4 =B5-B6 =C5-C6 =D5-D6 =E5-E6 =F5-F6 8 July =B7 August =C7 September =D7 Total =SUM(B11:D11) 3 9 Direct Material Budget 10 11 Required Production 12 Material per unit 13 Raw material required for production =B11*B12 14 Add: Desired Ending Inventory =C13/2 15 Total Required =B13+B14 16 Less: Beginning Inventory 43200 17 Raw material to be purchased =B15-B16 =C11*C12 =D13/2 =C13+C14 =B14 =C15-C16 =D11*D12 =E7*3/2 =D13+D14 =C14 =D15-D16 =E11*E12 =D14 =E13+E14 =B16 =E15-E16