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:

The finished goods inventory on hand at the end of each month must equal 2,000 units of Supermix plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 14,250 units.

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 75,375 cc of solvent H300.

The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

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.

Complete this question by entering your answers in the tabs below.

Budgeted Unit Sales July 49,000 August 54,000 September 64,000 October 44,000 November 34,000 December 24,000

Explanation / Answer

Production Budget July august September October Expected sale units 49,000 54,000 64,000 44,000 Add:ending inventory 15500 18000 13000 10500 total needs 64,500 72,000 77,000 54,500 less opening inventory 14,250 15,500 18,000 13,000 total production required 50,250 56,500 59,000 41,500 Direct materials budget July august September total total production required 50,250 56,500 59,000 165,750 cubic centimeters required per unit 3 3 3 3 units of raw materials needed 150750 169500 177000 497250 ending inventory 84750 88500 62,250 62,250 total materials required 235500 258000 239250 559500 less opening inventory 75,375 84,750 88,500 75,375 total materials required 160,125 173,250 150,750 484,125

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