Question 2(19 Marks)

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, Super-Stick, requires four kilograms of material D236 in the manufacture of each unit. The company is now planning raw materials needs for the third quarterJuly, August, and September. Peak sales of Super-Stick occur in the third quarter of each year. To keep production and shipments 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 8,350 units plus 20% of the next months sales. The finished goods inventory on June 30 is budgeted to be 22,420 units.

b.

The raw materials inventory on hand at the end of each month must be equal to 40% of the following months production needs for raw materials. The raw materials inventory on June 30 for material D236 is budgeted to be 130,400 kilograms.

c.

The company maintains no work in process inventories.

A sales budget for Super-Stick for the last six months of the year follows:

Month	Budget Unit Sales
July	60,700
August	75,350
September	105,700
October	53,350
November	30,350
December	15,140

Required:

Prepare a production budget for Super-Stick for July, August, September, and October. (9 Marks)

	July	August	September	October
Budgeted Sales	60700	75350	105700	53350
Required Production

Prepare a direct materials purchases budget showing the quantity of material D236 to be purchased for July, August, and September and for the quarter in total (10 Marks)

	July	August	September	Total
Required Production
Material D236 purchases