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 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 following inventory requirements a. The finished goods inventory on hand at the end of each month must be equal to 3,000 units of Supermix plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 12,400 units b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following c. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 66,000 cc of solvent H300 August September October November December Budgeted Sales in Units 47,000 52.000 62.000 42.000 32.000 22.000 Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October Answer is complete and correct. Pearl Products Limited Production Budget August September October Budgeted unit sales 52,00062,00042,000 Add: Desired units of ending finished goods inve 11.400 Total needs 60,40067,40073,40051,400 Less: Units of beginning finished goods inventory12,413,4005,40011,400 Required production in units 48,000 54,000 58,000 40,000 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 Answer is complete but not entirely correct. Pearl Products Limited Direct Materials Budget Third August 54,000 29,000 83,000 27,000 56,000 September 40,000 15.000 55,000 290020,000 35,000 58,000 48,000 27,000 75,000 Units of raw materials needed to meet production Add: Desired units of ending raw materials inve Total units of raw materials needed 78,000 Less: Units of beginning raw materials inventory24,000 Units of raw materials to be purchased 51,000 49,000

Explanation / Answer

Raw material required per unit = 3 cc

Pearl Products Limited

Direct Materials Budget

July August September Third Quarter Units of raw materials needed to meet production 144,000 (48,000*3) 162,000 (54,000*3) 174,000 (58,000*3) 480,000 Add : Desired units of ending raw materials inventory 81,000 (162,000*0.5) 87,000 (174,000*0.5) 60,000 (40,000*3*0.5) 60,000 Total units of raw material needed 225,000 249,000 234,000 540,000 Less : Units of beginning raw materials inventory (66,000) (81,000) (87,000) (66,000) Units of raw materials to be purchased 159,000 168,000 147,000 474,000

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