Question
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 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 3,000 units of Supermix plus 20% of the next months sales. The finished goods inventory on June 30 is budgeted to be 17,200 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 108,000 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. |
Budgeted Sales in Units | |
July | 71,000 |
August | 76,000 |
September | 86,000 |
October | 66,000 |
November | 56,000 |
December | 46,000 |
I just need help with the Direct Materials Budget in Requirement #3 below. Answers to Requirement #1 are correct.
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. |
Pearl Products Limited Production Budget July Budgeted unit sales 71,000 Add: Desired units of ending finished goods inventory 18,200 Total needs 89,200 Less: Units of beginning finished goods inventory 17,200 Required production in units 72,000 August 76,000 20,200 96,200 18,200 78,000 September 86,000 16,200 102,200 20,200 82,000 October 66,000 14,200 80,200 16,200 64,000 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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