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 planning its 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 equal 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. b. 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. c. The company maintains no work in process inventories. A monthly sales budget for Supermix for the third and fourth quarters of the year follows. Budgeted Unit Sales July 35,000 August 40,000 September 50,000 October 30,000 November 20,000 December 10,000 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 of solvent H300 to be purchased for July, August, and September, and for the quarter in total.
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 planning its 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 equal 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. b. 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. c. The company maintains no work in process inventories. A monthly sales budget for Supermix for the third and fourth quarters of the year follows. Budgeted Unit Sales July 35,000 August 40,000 September 50,000 October 30,000 November 20,000 December 10,000 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 of solvent H300 to be purchased for July, August, and September, and for the quarter in total.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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Transcribed Image Text: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 planning its 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 equal 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.
b. 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.
c. The company maintains no work in process inventories.
A monthly sales budget for Supermix for the third and fourth quarters of the year follows.
Budgeted
Unit Sales
July
35,000
August
40,000
September
50,000
October
30,000
November
20,000
December
10,000
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 of solvent H300 to be purchased for July, August, and September,
and for the quarter in total.
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