PROBLEM 9-15 Production and Direct Materials Budgets [LO3, LO4] Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (ce) of solvent H300 are required to manufacture cach unit of Supermix, one of the company's products. The company is now planning raw materials needs for Chapter 9 the third quarter, the quarter in which pecak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements: a The finishod goods inventory on hand at the end of each month must be equal to 3,000 units of Supermix plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be l10,000 units. b. The raw materials inventory on hand at the end of each month must be oqual to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 54,000 ce of solvent H300. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. Budgeted Sales in Units July August. September 35,000 40,000 50,000 30,000 20,000 October. November. December. 10,000 Required: I. Prepare a production budget for Supermix for the months July, August, September, and October. 2. Examine the production budget that you prepared in (1) above. Why will the company pro- duce more units than it sells in July and August, and fewer units than it sells in 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.
PROBLEM 9-15 Production and Direct Materials Budgets [LO3, LO4] Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (ce) of solvent H300 are required to manufacture cach unit of Supermix, one of the company's products. The company is now planning raw materials needs for Chapter 9 the third quarter, the quarter in which pecak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements: a The finishod goods inventory on hand at the end of each month must be equal to 3,000 units of Supermix plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be l10,000 units. b. The raw materials inventory on hand at the end of each month must be oqual to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 54,000 ce of solvent H300. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. Budgeted Sales in Units July August. September 35,000 40,000 50,000 30,000 20,000 October. November. December. 10,000 Required: I. Prepare a production budget for Supermix for the months July, August, September, and October. 2. Examine the production budget that you prepared in (1) above. Why will the company pro- duce more units than it sells in July and August, and fewer units than it sells in 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
![PROBLEM 9-15 Production and Direct Materials Budgets [LO3, LO4]
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South
East Asia. Three cubic centimeters (ce) of solvent H300 are required to manufacture cach unit of
Supermix, one of the company's products. The company is now planning raw materials needs for
Chapter 9
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 20% of the next month's sales. The finished goods inventory on June 30 is
budgeted to be l0,000 units.
b. The raw materials inventory on hand at the end of cach month must be oqual to one-half of the
following month's production needs for raw materials. The raw materials inventory on June
30 is budgeted to be 54,000 cc of solvent H300.
c. The company maintains no work in process imventories.
A sales budget for Supermix for the last six months of the year follows.
a.
Budgeted Sales
in Units
July
August.
September
35,000
40,000
50,000
October.
30,000
November .
December .
20,000
10,000
Required:
1. Prepare a production budget for Supermix for the months July, August, September, and
October.
2. Examine the production budget that you prepared in (1) above. Why will the company pro-
duce more units than it sells in July and August, and fewer units than it sells in 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe29bc666-6e82-41ee-aa43-87fc4966af40%2Fb4124cc5-595b-489d-b562-633d0f38eb58%2Fzn4e8hb_processed.png&w=3840&q=75)
Transcribed Image Text:PROBLEM 9-15 Production and Direct Materials Budgets [LO3, LO4]
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South
East Asia. Three cubic centimeters (ce) of solvent H300 are required to manufacture cach unit of
Supermix, one of the company's products. The company is now planning raw materials needs for
Chapter 9
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 20% of the next month's sales. The finished goods inventory on June 30 is
budgeted to be l0,000 units.
b. The raw materials inventory on hand at the end of cach month must be oqual to one-half of the
following month's production needs for raw materials. The raw materials inventory on June
30 is budgeted to be 54,000 cc of solvent H300.
c. The company maintains no work in process imventories.
A sales budget for Supermix for the last six months of the year follows.
a.
Budgeted Sales
in Units
July
August.
September
35,000
40,000
50,000
October.
30,000
November .
December .
20,000
10,000
Required:
1. Prepare a production budget for Supermix for the months July, August, September, and
October.
2. Examine the production budget that you prepared in (1) above. Why will the company pro-
duce more units than it sells in July and August, and fewer units than it sells in 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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