Question

Pearl Products Limiles of Shenzhen China, manufactures and distributes toys throughout South East Asia Three cubic centimeters lea) of solvent H30D are required to manufacture each unit al Supermix, 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 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 be equal to 3,000 units of Supermix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 13,250 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 60.000 cc of solvent H300 G. The company maintains no work in process inventories A sales budget for Supermix for the last six months of the year follows. July August September October November December Budgeted Sales in Units 41.000 45.000 55.000 36 na 26 na 18.000 Required: 1. Prepare a production budget for Supermix for the months July August September, and October. August 46,000 September 56,000 October 36,000 Pearl Products Limited Production Budget July Budgeted unit sales [ 41.000 Add: Desined units of ending finished goods Inventory Total needs Less: Units of beginning finished goods inventory Required production in units 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 tolal. September Third Quarter Pearl Products Limited Direct Materials Budget July August Units of raw materials needed to meet production Add: Desired units of ending raw materiale inventory Total units of raw materials needed Less: Units of beginning raw materials inventory Units of raw materials to be purchased

Answer 1

Production Budget
Particulars	July	August	September	October
Budgeted Unit Sales	41,000	46,000	56,000	36,000
Add : Finished Goods (25% of Next Month + 3000)	14,500	17,000	12,000	9,500
Less: Opening Stock	13,250	14,500	17,000	12,000
Required Units to be Produced	42,250	48,500	51,000	33,500

Direct Material Budget for Solvent H300
Particulars	July	August	September	III Quarter
Required Units to be Produced	42250	48500	51000	141750
Raw Material Required per Unit	3	3	3	3
Raw Material required for production	126750	145500	153000	425250
Add: Closing Stock of Raw Material (one half of following month)	72750	76500	50250	50250
Total of Raw Material Needed	199500	222000	203250	475500
Less: Opening Stock of Raw Material	-60000	-72750	-76500	-60000
Units of Raw Material to be purchased	139500	149250	126750	415500

Desired Ending Inventory for September = (33500*3)*50%= 50250