Question

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: 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 17.200 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 108,000 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 Budgeted Unit Sales 71,000 76,000 86,000 66,000 py 1 of 1 Next

Answer 1

	Production Budget
			July	august	September	October	total		november
Expected sale units			71,000	76,000	86,000	66,000	299,000		56,000
Add:ending inventory			18200	20200	16200	14200	14,200		12200
total needs			89,200	96,200	102,200	80,200	313,200		68,200
less opening inventory			17,200	18,200	20,200	16,200	17,200		14,200
total production required			72,000	78,000	82,000	64,000	296,000		54,000
ending inventory = 25% of expected sale unit of following month + 3000 units
	Direct materials budget
			July	august	September	October	total		nov
total production required			72,000	78,000	82,000	64,000	296,000		54,000
cubic centimeters required per unit			3	3	3	3	3		3
total cubic cm required			216000	234000	246000	192000	888000		162000
ending inventory			117000	123000	96000	81000	81,000
total materials required			333000	357000	342000	273000	969000
less opening inventory			108,000	117,000	123000	96,000	108,000
total materials required			225,000	240,000	219000	177,000	861,000