Pearl Products Limited of Shenzhen China manufactures and di

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 a The finished goods im entory on hand at the end of each month must equal 2,000 units of Supermix plus 25% of the next month\'s b. The raw matenals inventory on hand at the end of each month must equal one half of the following month\'s production needs for c The company maintains no work in process inventories sales. The finished goods inventory on June 30 is budgeted to be 17250 units. raw materials. The raw materials inventory on June 30 is budgeted to be 93,375 cc of solvent H300 A monthly sales budget for Supermix for the third and fourth quarters of the year folows Budget uly August September October Novenber Decenber Unit Sales 61,000 66,000 76,000 56,000 46,000 36,000 Required: 1 Prepare a production budget for Supermix for the months July, August. September and October 3. Prepare a direct materiels budget showing the the quarter in total. of solvent 300 to be purchased for July. August and September, and for

Solution

1) Production budget :

3) Direct material budget :

	July	August	september	October
Unit Sales	61000	66000	76000	56000
Add: Desired ending inventory	18500	21000	16000	13500
Total	79500	87000	92000	69500
Less: Beginning inventory	-17250	-18500	-21000	-16000
Production units	62250	68500	71000	53500