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 is now 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 be equal to 4,000 units of Supermix plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 21,250 units.

b.
The raw materials inventory on hand at the end of each month must be equal to one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 88,000 cc of solvent H300.

c. 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 69,000
August 74,000
September 84,000
October 64,000
November 54,000
December 44,000

Required:

1.
Prepare a production budget for Supermix for the months July, August, September, and October.

2.
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.

Units required to meet Sales budget is calculated by multiplying 3/4 of the given months sales as 25 % of it is already included in that months opening inventory . For example July's unit required to meet sales budget would be 69,000 * 3/4= 51,750

Each month's beginning inventory is previous month's ending inventory

As no data for sales budget of January is given the desired ending inventory is taken on the basis of previous months desired inventory.

Pearl Products Limited of Shenzhen, China

Direct Materials Budget

For the months of July August Sept October November Dec

Units to Meet

Production Budget 159,750 211,800 136,200 136,500 114,000

Desired Ending 105,900 68,100 68,250 57,000 49,500

Inventory

Less Beginning

Inventory 88,000 105,900 68,100 68,250 57,000

Direct Materials

Budget 177,650 174,000 136,350 125,250 106,500

Explanation:

Working Notes:

Each finished goods units requires 3 units of direct material . The units to meet the production budget are estimated by multiplying them with 3. for example the July Production budget is 53,250 so it is multiplied with 3 to get the direct material required and 53,250 *3= 159,750

anthougo anthougo · Answer 2 · 2021-10-11T09:25:21+02:00

1. Pearl Products Limited's Production Budget for Supermix for the months of July, August, September, and October

July August September October

Sales in units 69,000 74,000 84,000 64,000

Ending Inventory 22,500 25,000 20,000 17,500

Total units required 82,500 99,000 104,000 81,500

Beginning Inventory 21,250 22,500 25,000 20,000

Production Units 61,250 76,500 79,000 61,250

2. Pearl Products Limited's Direct Materials Budget for Solvent H300 for the quarter:

July August September Total

Solvent H300 required 183,750 229,500 239,000 652,250

Ending Inventory 114,750 119,500 91,875 326,125

Total materials 298,500 349,000 330,875 978,375

Beginning Inventory 88,000 114,750 119,500 322,250

Purchases of H300 210,500 234,250 211,375 656,125

Data and Calculations:

Sales Budget and Production Budget

July August September October November December

Sales in units 69,000 74,000 84,000 64,000 54,000 44,000

Ending

Inventory 22,500 25,000 20,000 17,500 15,000

Total units

required 82,500 99,000 104,000 81,500 69,000

Beginning

Inventory 21,250 22,500 25,000 20,000 17,500

Production 61,250 76,500 79,000 61,250 51,500

Raw materials Inventory:

July August September October November

Production Units 61,250 76,500 79,000 61,250 51,500

Raw materials (1 unit = 3cc of H300)

required 183,750 229,500 239,000 183,750 154,500

Ending Inventory 114,750 119,500 91,875 77,250

Total materials 298,500 349,000 330,875 261,000

Beginning

Inventory 88,000 114,750 119,500 91,875

Purchases 210,500 234,250 211,375 169,125

For the production units, calculate the ending inventory based on 4,000 + 25% of the next month's sales units. Add this to the sales units for the month to obtain the total units required. Subtract the beginning inventory from this total to get the units that must produced each month.

For the units to be purchased, first multiply the production units by 3 cc of H300. This gives the raw materials required for production. Then work out the ending inventory and add to the required production materials to get the units that must be available to meet production and ending inventory requirements. Subtract the beginning inventory from this total to get the units of raw materials that must be purchased each month.

Thus, the production units are as given above, while the units to be purchased of H300 are also indicated.

Learn more about preparing the production budget at https://brainly.com/question/15300754