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:

1. The finished goods inventory on hand at the end of each month must be equal to 8,700 units plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 22,840 units.
2. 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 131,800 kilograms.
3. 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	61,400
August	75,700
September	106,400
October	53,700
November	30,700
December	15,280

Required:
1. Prepare a production budget for SuperStick for July, August, September, and October.

2. Not available in Connect.

3. Prepare a direct materials purchases budget showing the quantity of material D236 to be purchased for July, August, and September and for the quarter in total.

Answer 1

	Production Budget
			july	Aug	Sept	oct
Budgeted sales (units)			61,400	75,700	106,400	53,700
add:Desired ending inventory			23840	29980	19440	14840
total needs			85,240	105,680	125,840	68,540
less:opening inventory			22,840	23,840	29,980	19,440
Required production			62,400	81,840	95,860	49,100
			july	Aug	Sept	Quarter
Required production(units)			62,400	81,840	95,860	240,100
material needed per unit			5	5	5	5
production needs (kgs)			312000	409200	479300	1200500
add desired ending inventory			163680	191720	98200	98200
total needs			475680	600920	577500	1298700
less opening inventory			131,800	163680	191720	131,800
material purchases			343,880	437240	385780	1,166,900