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 (cc) of solvent 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:

The finished goods inventory on hand at the end of each month must equal 2,000 units of Supermix plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 14,250 units.

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 75,375 cc of solvent H300.

The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

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.

Complete this question by entering your answers in the tabs below.

Budgeted Unit Sales July 49,000 August 54,000 September 64,000 October 44,000 November 34,000 December 24,000

Explanation / Answer

Solution:

Production Budget - Pearl Products Ltd Particulars July August September October Budgeted unit Sales 49000 54000 64000 44000 Add: Desired ending inventory (25% of next month sales + 2000) 15500 18000 13000 10500 Total Needs 64500 72000 77000 54500 Less: Opening Inventory 14250 15500 18000 13000 Required production in units 50250 56500 59000 41500 Direct Material Budget - Pearl Products Ltd Particulars July August September Thrid Quarter Unit to Produce 50250 56500 59000 165750 Units of Raw Material needed per unit of Finished Goods (Cubic Centimeters) 3 3 3 3 Units of Raw material needed to meet production 150750 169500 177000 497250 Add: Desired units of material in ending inventory 84750 88500 62250 62250 Total units of raw material Needed 235500 258000 239250 559500 Less: units of material in beginning inventory 75375 84750 88500 75375 Units of raw material to purchase 160125 173250 150750 484125

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.