Question

Franklin Products Limited manufactures and distributes a number of products to retailers. One of these products, SuperStick, requires five kilograms of material D236 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:

1. The finished goods inventory on hand at the end of each month must be equal to 9,000 units plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 23,200 units.
2. 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 material D236 is budgeted to be 133,000 kilograms.
3. 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	62,000
August	76,000
September	107,000
October	54,000
November	31,000
December	15,400

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

2. Not available in Connect.

3. Prepare a direct materials purchases budget showing the quantity of material D236 to be purchased for July, August, and September and for the quarter in total.

Answer 1

1.

Franklin Products Limited Production Budget
	July	August	September	October
Budgeted sales in units	62,000	76,000	107,000	54,000
Add: Ending finished goods inventory	24,200	30,400	19,800	15,200
Total needs	86,200	106,400	126,800	69,200
Less: Beginning finished goods inventory	(23,200)	(24,200)	(30,400)	(19,800)
Budgeted production in units	63,000	82,200	96,400	49,400

3.

Franklin Products Limited Direct Material Purchases Budget
	July	August	September	Quarter in total
Budgeted production in units	63,000	82,200	96,400	241,600
Direct material required per unit (in kgs)	5	5	5	5
Direct material required for production	315,000	411,000	482,000	1,208,000
Add: Desired ending direct material inventory	164,400	192,800	98,800	98,800
Less: Beginning direct material inventory	(133,000)	(164,400)	(192,800)	(133,000)
Direct material purchases (in kgs)	346,400	439,400	388,000	1,173,800