Pearl Products Limited of Shenzhen, China, manufactures anddistributes toys throughout Southeast Asia. Three cubic centimeters(cc) of solvent H300 are required to manufacture each unit ofSupermix, one of the company’s products. The company now isplanning raw materials needs for the third quarter, the quarter inwhich peak sales of Supermix occur. To keep production and salesmoving smoothly, the company has the following inventoryrequirements:
The finished goods inventory on hand at the end of each monthmust equal 3,000 units of Supermix plus 25% of the next month’ssales. The finished goods inventory on June 30 is budgeted to be13,250 units.
The raw materials inventory on hand at the end of each monthmust equal one-half of the following month’s production needs forraw materials. The raw materials inventory on June 30 is budgetedto be 63,375 cc of solvent H300.
The company maintains no work in process inventories.
A monthly sales budget for Supermix for the third and fourthquarters of the year follows.
| Budgeted Unit Sales |
| July | 41,000 |
| August | 46,000 |
| September | 56,000 |
| October | 36,000 |
| November | 26,000 |
| December | 16,000 |
|
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 ofsolvent H300 to be purchased for July, August, and September, andfor the quarter in total.
