Question

In: Accounting

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires four kilograms of material 0236 in the manufacture of each unit.

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires four kilograms of material 0236 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter-July, August, and September. Peak sales of SuperStick occur in the third quarter of each year. To keep production and shipments 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 8,000 units plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 22,000 units. 

b. The raw materials inventory on hand at the end of each month must be equal to 40% of the following month's production needs for raw materials. The raw materials inventory on June 30 for mate-rial 0236 is budgeted to be 129,000 kilograms.

c. The company maintains no work in process inventories.

A sales budget for SuperStick for the last six months of the year follows:

  Budgeted Sales in Units
July 60,000
August 75,000
September 105,000
October 53,000
November 30,000
December 15,000

Required

1. Prepare a production budget for SuperStick for July, August, September, and October.

Solutions

Expert Solution

 

  July August September October
Budgeted sales (units) 60,000 75,000 105,000 53,000
Add desired ending inventory 23,000 29,000 18,600 14,000
Total needs $83,000 $104,000 $123,600 67,000
Less beginning inventory 22,000 23,000 29,000 18,600
Required production 61,000 81,000 94,600 48,400

July: 61,000

August: 81,000

September: 94,600

October: 48,400

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