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 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 19.250 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 99,375 cc of solvent H300 C. The company maintains no work in process inventories A sales budget for Supermix for the last six months of the year follows July August September October November December Budgeted Sales in Units 65,000 70,000 80,000 60,000 50,000 40,000 Required 1. Prepare a production budget for Supermix for the months July, August, September, and October Pearl Products Limited Production Budget July August September October Budgeted unit sales Total needs Required production in units

Explanation / Answer

1.

Pearl Products Limilted

Production Budget

3.

Pearl Products Limited

Direct Materials Budget

July August September October Budgeted unit sales 65,000 70,000 80,000 60,000 Ending finished goods inventory 20,500 [3,000+(70,000*25%)] 23,000 [3,000+(80,000*25%)] 18,000 [3,000+(60,000*25%)] 15,500 [3,000+(50,000*25%)] Required finished goods 85,500 93,000 98,000 75,500 Beginning finished goods inventory (19,250) (20,500) (23,000) (18,000) Required production in units 66,250 72,500 75,000 57,500

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