CONnect JACCOUNTING roblems PROBLEM 10-15 Production and Direct Materials Budgets (LO4b, LO4c Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture cach anit of Supermix, one of the company's products. The company is now planning raw materials aceds fir 12:06 AM Master Budgeting 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 al budgeted to be 10,000 units. The raw materials inventory on hand at the end of each month must be equal to one-balf 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 The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows Budgeted Sales in Units July August... September October... November December 35,000 40,000 50,000 30,000 20,000 10,000 Required: 1. Prepare October production budget for Supermix for the months July, August, September, and a duce more units than it sells in July and August, and fewer units than it sells in September and October? 2Examine the production budget that you prepared in (1) above. Why will the company pro- 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. 12:06 AM 4 L04e)