Franklin Products Limited manufactures and distributes a number of products to r

Question

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires five kilograms of material D236 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter—July, August, and September. Peak sales of SuperStick occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements:

The finished goods inventory on hand at the end of each month must be equal to 9,000 units plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 23,200 units b. The raw materials inventory on hand at the end of each month must be equal to 40% of the following month's production needs for raw materials. The raw materials inventory on June 30 for material D236 is budgeted to be 133,000 kilograms C. The company maintains no work in process inventories. A sales budget for SuperStick for the last six months of the year follows Budgeted Sales July August September October November December in Units 62,000 76,000 107,000 54,000 31,000 15,400 Required: 1. Prepare a production budget for SuperStick for July, August, September, and October. July August September October Budgeted sales (units) otal needs Required production

Explanation / Answer

Franklin Products Limited Production Budget July August September October Nov Budgeted Sales Units 62000 76000 107000 54000 31000 (+) Ending inventory 24200 30400 19800 15200 12080 (9000+76000*20%) (9000+107000*20%) (9000+54000*20%) (9000+31000*20%) (9000+15400*20%) Total needs 86200 106400 126800 69200 43080 (-) Begning Inventory 23200 24200 30400 19800 15200 Budgeted Production 63000 82200 96400 49400 27880 Pull Company Direct Material Purchase Budget - Material D236 July August September October Nov Budgeted Production 63000 82200 96400 49400 27880 Material D236 requirement per unit 5 5 5 5 5 Material needed for production 315000 411000 482000 247000 139400 Budgeted ending inventory (40% of next months production) 164400 192800 98800 55760 (411000*40%) (482000*40%) (247000*40%) (139400*40%) Total material requirements 479400 603800 580800 302760 (-) Budgeted begning inventory 133000 164400 192800 98800 Material to be purchased 346400 439400 388000 203960

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