Pearl Products Limited of Shenzhen, China, manufactures and distributes toys thr

Question

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters H300 are required to manufacture each unit of Supermix, one of the company's products. The company now is 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 equal 3,000 units of Super mix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 16,250 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 81,375 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 it Sales July August 53,000 58,800 September 68,000 48,000 38,000 December 28,000 October November to search

Explanation / Answer

Production Budget July August September October Sales During the Month $53,000 58000 68000 48000 Add: Closing Stock 17500 20000 15000 12500 Less: Opening Stock 16250 17500 20000 15000 Required Production 54250 60500 63000 45500 Calculation Of Closing Stock July August September October November Budgeted sales 53000 58000 68000 48000 38000 25% of next month sale 14500 17000 12000 9500 Extra Required 3000 3000 3000 3000 Closing Stock 17500 20000 15000 12500 Direct Material Purchase Budget July August September Total H300 Required for current month production 162750 181500 189000 533250 Add: Closing Stock 50% of next month requirement 90750 64260 68250 223260 Less: Opening Stock 81375 90750 64260 236385 Direct Material Required 172125 155010 192990 520125 Calculation of Current Month Requirement July August September October Production Requirement(A) 54250 60500 63000 45500 No of units req to produce one unit (B) 3 3 3 3 D236 Required for current month production (A*B) 162750 181500 189000 136500

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