Pearl Products Limited of Shenzhen, China, manufactures and distributes toys thr

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 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 im entory on hand at the end of each month must equal 2,000 units of Supermix plus 25% of the next month's b. The raw matenals inventory on hand at the end of each month must equal one half of the following month's production needs for c The company maintains no work in process inventories sales. The finished goods inventory on June 30 is budgeted to be 17250 units. raw materials. The raw materials inventory on June 30 is budgeted to be 93,375 cc of solvent H300 A monthly sales budget for Supermix for the third and fourth quarters of the year folows Budget uly August September October Novenber Decenber Unit Sales 61,000 66,000 76,000 56,000 46,000 36,000 Required: 1 Prepare a production budget for Supermix for the months July, August. September and October 3. Prepare a direct materiels budget showing the the quarter in total. of solvent 300 to be purchased for July. August and September, and for

Explanation / Answer

1) Production budget :

3) Direct material budget :

July August september October Unit Sales 61000 66000 76000 56000 Add: Desired ending inventory 18500 21000 16000 13500 Total 79500 87000 92000 69500 Less: Beginning inventory -17250 -18500 -21000 -16000 Production units 62250 68500 71000 53500

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