Pearl Products Limited of Shenzhen, China, manufactures and distributes toys thr
ID: 2524592 • Letter: P
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.
Budgeted Unit Sales July 49,000 August 54,000 September 64,000 October 44,000 November 34,000 December 24,000Explanation / Answer
Solution:
Part 1 – Production Budget
Production Budget
July
August
September
October
November
Expected Sales Units
49,000
54,000
64,000
44,000
34,000
Plus: Desired Ending Inventory (2,000 units + 25% of Next Month's Sales)
15,500
18,000
13,000
10,500
Total Units needed
64,500
72,000
77,000
54,500
Less: Expected Beginning Inventory
14,250
15,500
18,000
13,000
Production Budget in Units
50,250
56,500
59,000
41,500
Part 2 --- Direct Material Budget for Solvent H300
Production Budget
July
August
September
Quarter
October
Budgeted Production Units (Refer Part 1)
50,250
56,500
59,000
41,500
Raw material H300 required per unit (cc)
3
3
3
3
Raw material H300 required for production (cc)
150,750
169,500
177,000
124,500
Plus: Desired Ending Inventory Raw material
84,750
88,500
62,250
#REF!
Total raw materials need
235,500
258,000
239,250
Less: Beginning H300 Inventory
75,375
84,750
88,500
Raw material H300 to be purchased
160,125
173,250
150,750
484,125
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Production Budget
July
August
September
October
November
Expected Sales Units
49,000
54,000
64,000
44,000
34,000
Plus: Desired Ending Inventory (2,000 units + 25% of Next Month's Sales)
15,500
18,000
13,000
10,500
Total Units needed
64,500
72,000
77,000
54,500
Less: Expected Beginning Inventory
14,250
15,500
18,000
13,000
Production Budget in Units
50,250
56,500
59,000
41,500
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.