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 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 2,000 units of Supermix plus 25% of the next months sales. The finished goods inventory on June 30 is budgeted to be 14,250 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following months production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 75,375 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.

Budgeted Sales in Units

July

49,000

August

54,000

September

64,000

October

44,000

November

34,000

December

24,000

Prepare a production budget for Supermix for the months July, August, September, and October.

Pearl Products Limited
Production Budget
	July	August	September	October
Budgeted unit sales	49,000	54,000	64,000	44,000
Add: Desired units of ending finished goods inventory
Total needs
Less: Units of beginning finished goods inventory
Required production in units

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
Direct Materials Budget
	July	August	September	Third Quarter
Units of raw materials needed to meet production
Total units of raw materials needed
Units of raw materials to be purchased