Question

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires five kilograms of material D236 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter-July, August, and September. Peak sales of SuperStick occur in the third quarter of each year. To keep production and shipments 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 8,850 units plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 23,020 units. b. The raw materials inventory on hand at the end of each month must be equal to 40 % of the following month's production needs for raw materials. The raw materials inventory on June 30 for material D236 is budgeted to be 132.400 kilograms. C. The company maintains no work in process inventories. A sales budget for SuperStick for the last six months of the year follows: Budgeted Sales in Units July August September October 61,700 75,850 106,700 53,850 November December 30,850 15,340 Required: 1. Prepare a production budget for SuperStick for July, August, September, and October October September August July Budgeted sales (units) Total needs

Answer 1

1
	July	August	September	October
Budgeted unit sales	61700	75850	106700	53850
Add: Desired ending inventory	24020	30190	19620	15020
Total needs	85720	106040	126320	68870
Less: Beginning inventory	23020	24020	30190	19620
Required production in units	62700	82020	96130	49250
3
	July	August	September	Third Quarter
Required production in units	62700	82020	96130	240850
Materials D236 needed per unit (kgs.)	5	5	5	5
Production needs (kgs.)	313500	410100	480650	1204250
Add: Desired ending inventory (kgs.)	164040	192260	98500	98500
Total material D236 needs	477540	602360	579150	1302750
Less: Beginning inventory (kgs.)	132400	164040	192260	132400
Material D236 purchases (kgs.)	345140	438320	386890	1170350

Workings:
	July	August	September
Desired ending inventory	=8850+(75850*20%)	=8850+(106700*20%)	=8850+(53850*20%)
	July	August	September
Desired ending inventory (kgs.)	=410100*40%	=480650*40%	=49250*5*40%