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 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:

a. 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 11,250 units.

b. 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 57,375 cc of solvent H300.

c. 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 5-les

July 37,000

August 42,000

September 52, 000

October 32, 000

November 22,000

December 12,000

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.

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