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 8,250 units plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 22,300 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 130,000 kilograms. C. The company maintains no work in process inventories. A sales budget for SuperStick for the last six months of the year follows: July August September October November December Budgeted Sales in Units 60,500 75,250 105,500 53, 250 30, 250 15, 100

Answer 1

Production Budget :-

	July	August	September	October
Budgeted Sales (units)	60500	75250	105500	53250
Add: Desired ending inventory	23300	29350	18900	14300
Total needs	83800	104600	124400	67550
Less: Beginning inventory	22300	23300	29350	18900
Required production	61500	81300	95050	48650

Direct Materials Purchase Budget :-

	July	August	September	Third Quarter
Required production (units)	61500	81300	95050	237850
Material D236 needed per unit (kgs.)	4	4	4	4
Production needs (kgs.)	246000	325200	380200	951400
Add: Desired ending inventory (kgs.)	130080	152080	77840	77840
Total material D236 needs	376080	477280	458040	1029240
Less: Beginning inventory (kgs.)	130000	130080	152080	130000
Material D236 purchases (kgs.)	246080	347200	305960	899240