Question

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires four 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 8,100 units plus 20% of the next month's sales The finished goods inventory on June 30 is budgeted to be 22120 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 129,400 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 60,200 75,100 105, 200 53,100 30,100 15,040 October November December Required: 1. Prepare a production budget for SuperStick for July, August, September, and October July August September October |Budgeted sales (units) 0 Total needs

Answer 1

Requirement 1:

Production Budget
	July	August	September	October
Budgeted sales (units)	60,200	75,100	105,200	53,100
Desired ending finished goods*	23,020	29,040	18,620	14,020
Total needs	83,220	104,140	123,820	67,120
Less: Beginning finished goods	-22,120	-23,020	-29,040	-18,620
Required production (units)	61,100	81,120	94,780	48,500

*Desired finished goods:

	July	August	September	October	November
Budgeted sales (units)	60,200	75,100	105,200	53,100	30,100
20% of next month's sales (units)	15,020	21,040	10,620	6,020
Minimum	8,000	8,000	8,000	8,000
Desired finished goods	23,020	29,040	18,620	14,020

Requirement 2:

Direct materials purchases Budget
	July	August	September	Third Quarter
Required production (units)	61,100	81,120	94,780	237,000
Material D236 Needed per unit (kgs.)	4	4	4	4
Production needs (kgs)	244,400	324,480	379,120	948,000
Desired ending inventory	129,792	151,648	77,600*	359,040
Total Material D236 needs	374,192	476,128	456,720	1,307,040
Less: Beginning inventory	-129,400	-129,792	-151,648	-77,600
Material D236 purchases (kgs)	244,792	346,336	305,072	1,229,440

*Desired ending inventory of September:

	October
Production requirement	48,500
Material D236 needed per unit (kgs.)	4
Total production needs	194,000
x Desired rate of ending inventory	40%
=Desired ending inventory	77,600