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

Question

3 Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires four 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 a.The finished goods inventory on hand at the end of each month must be equal to 8.400 units plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 22,480 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 130,600 kilograms c. The company maintains no work in process inventories A sales budget for SuperStick for the last six months of the year follows August September October November December Budgeted Sales in Units 60,800 75,400 105,800 53,400 30,400 15,160

Explanation / Answer

Franklin Products Limited Production Budget July August September October Nov Budgeted Sales Units 60800 75400 105800 53400 30400 (+) Ending inventory 23480 29560 19080 14480 11432 (8400+75400*20%) (8400+105800*20%) (8400+53400*20%) (8400+30400*20%) (8400+15160*20%) Total needs 84280 104960 124880 67880 41832 (-) Beginning Inventory 22480 23480 29560 19080 14480 Budgeted Production 61800 81480 95320 48800 27352 Pull Company Direct Material Purchase Budget - Material D236 July August September October Nov Budgeted Production 61800 81480 95320 48800 27352 Material D236 requirement per unit 4 4 4 4 4 Material needed for production 247200 325920 381280 195200 109408 Budgeted ending inventory (40% of next months production) 130368 152512 78080 43763.2 (325920*40%) (381280*40%) (195200*40%) (109408*40%) Total material requirements 377568 478432 459360 238963.2 (-) Budgeted beginning inventory 130600 130368 152512 78080 Material to be purchased 246968 348064 306848 160883.2

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