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 inventory on hand at the end of each month must equal 2,000 units of Supermix plus 20% of the next month\'s sales. The finished goods inventory on June 30 is budgeted to be 15,400 units b. 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 102,000 cc of solvent H300 c. The company maintains no work in process inventories. A monthly sales budget for Supermix for the third and fourth quarters of the year follows uly August September October November December Budgeted Unit Sales 67,000 72,000 82,000 62,000 52,000 42,000

Solution

Pearl Products Limited

Production Budget

Pearl Products Limited

Direct Materials Budget

	July	August	September	October
Budgeted unit sales	67,000	72,000	82,000	62,000
Add : Desired ending inventory of finished goods	16,400 [2,000+(72,000*0.2)]	18,400 [2,000+(82,000*0.2)]	14,400 [2,000+(62,000*0.2)]	12,400 [2,000+(52,000*0.2)]
Total needs	83,400	90,400	96,400	74,400
Less : Beginning inventory of finished goods	(15,400)	(16,400)	(18,400)	(14,400)
Required production in units	68,000	74,000	78,000	60,000