Pearl Products Limited of Shenzhen, China, manufactures and distributes toys thr
ID: 2335264 • Letter: P
Question
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company is now 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:
The finished goods inventory on hand at the end of each month must be equal to 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.
The raw materials inventory on hand at the end of each month must be equal to 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.
Prepare a production budget for Supermix for the months July, August, September, and October.
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.
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company is now 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:
Explanation / Answer
Pearl Products Limited
Production Budget working for Finished Goods
July
August
September
October
November
December
Units to be sold
35000
40000
50000
30000
20000
10000
Desired Ending Finished Inventory
11000*
13000
9000
7000
5000
Total Units needed
46000
53000
59000
37000
25000
Less : Beginning Finished Inventory
10000
11000**
13000
9000
7000
Units to be Produced
36000
42000
46000
28000
18000
*3000+(4000*20%) and so on for other months
**Ending of last month is beginning of current month
Pearl Products Limited
Raw material purchase budget working
July
August
September
October
November
Total Finished Units to be Produced (in Units)
36000
42000
46000
28000
18000
Raw material needed per Finished Unit (in cc)
3
3
3
3
3
Total Raw material Required for production ( in Cc)
108000
126000
138000
84000
54000
Add: Desired Ending Inventory ( in Cc)
63000*
69000
42000
27000
Total raw material needed ( in Cc)
171000
195000
180000
1E+05
Less: Beginning Raw Material available ( in Cc)
54000
63000
69000
42000
Raw material units to purchase ( in Cc)
117000
132000
111000
69000
*Half of august Raw material needs ie. 126000/2 and same calculation for other months.
Pearl Products Limited
Production Budget
July
August
September
October
Units to be sold
35000
40000
50000
30000
Desired Ending Finished Inventory
11000
13000
9000
7000
Total Units needed
46000
53000
59000
37000
Less : Beginning Finished Inventory
10000
11000
13000
9000
Units to be Produced
36000
42000
46000
28000
Pearl Products Limited
Raw material purchase budget
July
August
September
Quarter
Total Finished Units to be Produced (in Units)
36000
42000
46000
124000
Raw material needed per Finished Unit (in Cc)
3
3
3
3
Total Raw material Required for production ( in Cc)
108000
126000
138000
372000
Add: Desired Ending Inventory ( in Cc)
63000
69000
42000
42000
Total raw material needed ( in Cc)
171000
195000
180000
414000
Less: Beginning Raw Material available ( in Cc)
54000
63000
69000
54000
Raw material units to purchase ( in Cc)
117000
132000
111000
360000
Pearl Products Limited
Production Budget working for Finished Goods
July
August
September
October
November
December
Units to be sold
35000
40000
50000
30000
20000
10000
Desired Ending Finished Inventory
11000*
13000
9000
7000
5000
Total Units needed
46000
53000
59000
37000
25000
Less : Beginning Finished Inventory
10000
11000**
13000
9000
7000
Units to be Produced
36000
42000
46000
28000
18000
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