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:

1. The finished goods inventory on hand at the end of each monthmust equal 4,000 units of Supermix plus 20% of the next month’ssales. The finished goods inventory on June 30 is budgeted to be19,000 units.

2. 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 114,000 cc of solvent H300.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourthquarters of the year follows.

	Budgeted UnitSales
July	75,000
August	80,000
September	90,000
October	70,000
November	60,000
December	50,000

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.