Textbook Exercise 8-10-Production and Direct Materials Budgets 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 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 10,000 units. 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 54,000 cc of solvent H300. The company maintains no work in process inventories. A monthly sales budget for Supermix for the third and fourth quarters of the year follows. b. C. July August September October November December quired: 1. Prepare a production budget for Supermix for the months July, August, September, and October. July Budgeted in Units Add: Desired units of Finished Goods Inventory = TOTAL UNITS NEEDED Less: Units of Finished Goods Inventory Budgeted Unit Sales 35,000 40,000 50,000 30,000 20,000 10,000 Required in Units, i.e., Production Budget August September October ers Examine the production budget that you prepared in (1) above. Why will the company produce more units than it sells in July and August and fewer units than it sells in September and October?

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…

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…