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 10.000 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 54,000 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 August September October November December Budgeted Unit Sales 35,000 40.000 50,000 30.000 20.000 10,000 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

	Production Budget
			July	august	September	October
Expected sale units			35,000	40,000	50,000	30,000
Add:ending inventory			11000	13000	9000	7000
total needs			46,000	53,000	59,000	37,000
less opening inventory			10,000	11,000	13,000	9,000
total production required			36,000	42,000	46,000	28,000

	Direct materials budget
			July	august	September	total
total production required			36,000	42,000	46,000	124,000
cubic centimeters required per unit			3	3	3	3
units of raw materials needed			108000	126000	138000	372000
ending inventory			63000	69000	42,000	42,000
total materials required			171000	195000	180000	414000
less opening inventory			54,000	63,000	69,000	108,000
total materials required			117,000	132,000	111,000	306,000