Question

Check my work 2 Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast 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: 50 points a. The finished goods inventory on hand at the end of each month must equal 3,000 units of Supermix plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 12,400 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 72,000 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 47,000 52,000 62,000 42,000 32,000 22,000 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.

Answer 1

1.

	July	August	September	October
Budgeted units sales	47,000	52,000	62,000	42,000
Add: Desired units of ending finished goods inventory	13,400	15,400	11,400	9,400
Total needs	60,400	67,400	73,400	51,400
Less: Units of beginning finished goods inventory	12,400	13,400	15,400	11,400
Required production in units	48,000	54,000	58,000	40,000

2.

	July	August	September	Total Quarter
Required production in units finished goods	48,000	54,000	58,000	160,000
Units of raw material needed per unit of finished goods	3	3	3	3
Units of raw material needed to meet production	144,000	162,000	174,000	480,000
Add: Desired units of ending raw material inventory	81,000	87,000	60,000	228,000
Total units of raw material needed	225,000	249,000	234,000	708,000
Less: Units of beginning raw material inventory	72,000	81,000	87,000	240,000
Units of raw material to be purchased	153,000	168,000	147,000	468,000