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 4,000 units of Supermix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 15,250 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 69,375 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. July Budgeted Unit Sales 45,000 August 50,000 September 60,000 October 40,000 November 30,000 December 20,000 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.
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 4,000 units of Supermix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 15,250 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 69,375 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. July Budgeted Unit Sales 45,000 August 50,000 September 60,000 October 40,000 November 30,000 December 20,000 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.
Chapter18: The Management Of Accounts Receivable And Inventories
Section: Chapter Questions
Problem 20P
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Transcribed Image Text: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 4,000 units of Supermix plus 25% of the next month's
sales. The finished goods inventory on June 30 is budgeted to be 15,250 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 69,375 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.
July
Budgeted
Unit Sales
45,000
August
50,000
September
60,000
October
40,000
November
30,000
December
20,000
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.
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