Exercise 7-10 Production and Direct Materials Budgets [LO7-3, LO7-4] Pearl Produ
ID: 2565722 • Letter: E
Question
Exercise 7-10 Production and Direct Materials Budgets [LO7-3, LO7-4]
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:
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 16,250 units.
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 81,375 cc of solvent H300.
Prepare a production budget for Supermix for the months July, August, September, and October.
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:
Explanation / Answer
Prepare a production budget for Supermix for the months July, August, September, and October.
July August September October Sales units 53000 58000 68000 48000 Add: Desired ending inventory 17500 20000 15000 12500 Total needs 70500 78000 83000 60500 Less: Beginning inventory (16250) (17500) (20000) (15000) Production units 54250 60500 63000 45500Related Questions
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