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 now is 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 equal 4,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 19,000 units.

The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 114,000 cc of solvent H300.

The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

Required:

1. Prepare a production budget for Supermix for the months July, August, September, and October.

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.

Budgeted Unit Sales July 75,000 August 80,000 September 90,000 October 70,000 November 60,000 December 50,000

Explanation / Answer

1 July August September October Budgeted sales 75000 80000 90000 70000 Add: Desired ending inventory 20000 22000 18000 16000 Total needs 95000 102000 108000 86000 Less: Beginning inventory 19000 20000 22000 18000 Required production 76000 82000 86000 68000 2 July August September Quarter Budgeted production 76000 82000 86000 244000 Cubic centimeters per unit 3 3 3 3 Production needs 228000 246000 258000 732000 Add: Desired ending inventory 123000 129000 102000 102000 Total material needs 351000 375000 360000 834000 Less: Beginning inventory 114000 123000 129000 114000 Material purchases 237000 252000 231000 720000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.