Question
In: Accounting
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast 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:
-
The finished goods inventory on hand at the end of each month must equal 2,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 13,000 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 84,000 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.
| Budgeted Unit Sales | |
| July | 55,000 |
| August | 60,000 |
| September | 70,000 |
| October | 50,000 |
| November | 40,000 |
| December | 30,000 |
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.
Solutions
Expert Solution
| Ans. 1 | PEARL PRODUCTS LIMITED | ||||||||
| Direct Materials Budget | |||||||||
| July | August | September | October | ||||||
| Budgeted unit sales | 55,000 | 60,000 | 70,000 | 50,000 | |||||
| Add: Desired units of ending finished goods inventory | 14,000 | 16,000 | 12,000 | 10,000 | |||||
| Total needs | 69,000 | 76,000 | 82,000 | 60,000 | |||||
| Less: Units of beginning finished goods inventory | -13,000 | -14,000 | -16,000 | -12,000 | |||||
| Required production in units | 56,000 | 62,000 | 66,000 | 48,000 | |||||
| *Calculations for Ending inventory: | *Calculations for Beginning inventory: | ||||||||
| Months | Months | ||||||||
| July | 2,000 + (60,000 * 20%) | 14,000 | July | Ending inventory of June | 13,000 | ||||
| August | 2,000 + (70,000 * 20%) | 16,000 | August | Ending inventory of July | 14,000 | ||||
| September | 2,000 + (50,000 * 20%) | 12,000 | September | Ending inventory of August | 16,000 | ||||
| October | 2,000 + (40,000 * 20%) | 10,000 | October | Ending inventory of September | 12,000 | ||||
| *Ending inventory of previous month = Beginning inventory for current month | |||||||||
| Ans. 3 | PEARL PRODUCTS LIMITED | ||||||||
| Direct Materials Budget | |||||||||
| July | August | September | Third Quarter | ||||||
| Budgeted production (units) | 56,000 | 62,000 | 66,000 | 184,000 | |||||
| (X) Materials requirement per unit | 3 | 3 | 3 | 3 | |||||
| Units of raw materials needed to meet production | 168000 | 186000 | 198000 | 552000 | |||||
| Add: Desired units of ending raw materials inventory | 93000 | 99000 | 72000 | 264,000 | |||||
| Total units of raw materials needed | 261000 | 285000 | 270000 | 816,000 | |||||
| Less: Units of beginning raw materials inventory | -84000 | -93000 | -99000 | -276,000 | |||||
| Units of raw materials to be purchased | 177000 | 192000 | 171000 | 540,000 | |||||
| *Calculations for Units of raw materials needed to meet production in the month of October : | |||||||||
| October | |||||||||
| Budgeted production (units) | 48,000 | ||||||||
| (X) Materials requirement per unit | 3 | ||||||||
| Units of raw materials needed to meet production | 144000 | ||||||||
| *Calculations for Ending inventory: | *Calculations for Beginning inventory: | ||||||||
| Months | Months | ||||||||
| July | 186,000 * 1/2 | 93000 | July | Ending inventory of June | 84000 | ||||
| August | 198,000 * 1/2 | 99000 | August | Ending inventory of July | 93000 | ||||
| September | 144,000 * 1/2 | 72000 |
 ekkarill92 answered 1 year agoRelated SolutionsPearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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: The finished goods inventory on hand at the end of
each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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: The finished goods inventory on hand at the end of
each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters...Pearl Products Limited of Shenzhen, China, manufactures and
distributes toys throughout Southeast 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:
The finished goods inventory on hand at the end of each month...
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