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 4,000 units of Supermix plus 20% of the next months sales. The finished goods inventory on June 30 is budgeted to be 16,600 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 82,000 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 63,000 August 68,000 September 78,000 October 58,000 November 48,000 December 38,000
Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October.
Budgeted unit sales July August September and October
Total Needs
Less beginning inventory
Required production
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.
Units of raw materials needed to meet production July August September Third Quarter
Desired units of ending raw materials inventory
Total units of raw materials
Less units of beginning raw materials inventory
Units of raw materials to be purchased
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started