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 companys products. The company is planning its 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:

1. The finished goods inventory on hand at the end of each month must equal 4,000 units of Supermix plus 20% of the next months sales. The finished goods inventory on June 30 is budgeted to be 14,200 units.

2. The raw materials inventory on hand at the end of each month must equal one-half of the following months production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 78,000 cc of solvent H300.

3. The company maintains no work in process inventories.

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

	Budgeted Unit Sales
July	51,000
August	56,000
September	66,000
October	46,000
November	36,000
December	26,000

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.

Required 1 Required 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. Pearl Products Limited Third Quarter August 58,000 September 62,000 CC CC CC CC Direct Materials Budget July Required production in units of finished goods 52,000 Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production 156,000 Add: Desired units of ending raw materials inventory 87,000 Total units of raw materials needed 70,000 Less: Units of beginning raw materials inventory Units of raw materials to be purchased 174,000 93,000 186,000 66,000 93,000 87,000 Required 1 Required 3