25.00 points Pearl Products Limited of Shenzhen, China, manufactures and distrib

Question

25.00 points 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 company's 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 uirements 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 month's sales. The finished goods inventory on June 30 is budgeted to be 19,000 units b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials The raw materials inventory on June 30 is budgeted to be 114,000 cc of solvent H300 cThe company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. Budgeted Sales August September October November December 75,000 80,000 90,000 70,000 60,000 50,000 Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October Pearl Products Limited Production Budget SeptemberOctober

Explanation / Answer

1 Production Budget

July August September October

Budgeted unit sales 75000 80000 90000 70000

Add: Budgeted ending units 20000 22000 18000 16000

Total 95000 102000 108000 86000

less: Beginning units 19000 20000 22000 18000   

Required production units 76000 82000 86000 68000

Note:-    Budgeted ending units: 4000 units plus 20% of next month sale

July August September October

Ending inventory 4000 + 20%*80000 4000+20%*90000 4000+20%*70000 4000 +20%*60000

   =20000 =22000 =18000 =16000

Beginning inventory: Ending of the month will be the opening of next month

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