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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
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: a. The finished goods inventory on hand at the end of each month must be equal to 4,000 units of Supermix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 18,250 units b. 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 76,000 cc of solvent H300. c. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. July August September October November December Budgeted Sales in Units 57,000 62,000 72,000 52,000 42,000 32,000 Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October Pearl Products Limited Production Budget July Budgeted unit sales 57,000 Add: Desired units of ending finished goods inventory 19,500 Total needs 76,500 Less: Units of beginning finished goods inventory 18.250 Required production in units 58,250 August 62,000 22,000 84,000 19,500 64,500 September 72,000 17,000 89,000 22,000 67.000 October 52,000 14,500 66,500 17,000 49,500 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. August September Third Quarter Pearl Products Limited Direct Materials Budget July Units of raw materials needed to meet production Add: Desired units of ending raw materials inventory Total units of raw materials needed Less: Units of beginning raw materials inventory Units of raw materials to be purchased
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