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 3.000 units of Supermix plus 25% of the next month's sales. The finished goods Inventory on June 30 is budgeted to be 16,250 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 81,375 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 53,000 58,000 68,000 48,000 38,000 28,000 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. Complete this question by entering your answers in the tabs below. Required 1 Required 3 Prepare a production budget for Supermix for the months July, August, September, and October

Answer 1

1)

Pearl Products Limited
Production Budget
	July	August	September	October
Budgeted Unit sales	53,000.00	58,000.00	68,000.00	48,000.00
Add: Desired ending inventory	17,500.00	20,000.00	15,000.00	12,500.00
Total needs	70,500.00	78,000.00	83,000.00	60,500.00
Less: Beginning inventory	16,250.00	17,500.00	20,000.00	15,000.00
Required production in Units	54,250.00	82,000.00	86,000.00	68,000.00

3)

Pearl Products Limited
Direct Materials Budget
	July	August	September	Quarter
Budgeted production in units	54,250.00	82,000.00	86,000.00	222,250.00
Units of Raw Materials Needed per unit of finished goods	3.00	3.00	3.00	3.00
Units of raw materials needed to meet production	162,750.00	246,000.00	258,000.00	666,750.00
Add: Desired ending inventory	123,000.00	129,000.00	102,000.00	102,000.00
Total Units of raw Materials needed	285,750.00	375,000.00	360,000.00	768,750.00
Less: Beginning inventory	81,375.00	123,000.00	129,000.00	81,375.00
Units of Raw Materials to be Purchased	204,375.00	252,000.00	231,000.00	687,375.00