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Question: Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Five cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company is now 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 12,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 23,500 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 117,500 cc of solvent H300. c. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows. Budgeted Sales in Units July 46,000 August 62,500 September 61,000 October 41,000 November 31,000 December 21,000 Requirement 1: Prepare a production budget for Supermix for the months July, August, September, and October. (Input all amounts as positive values.) July August September October Budgeted sales Less/Add: Desired ending inventory Total needs Less/Add: Beginning inventory Required production Requirement 2: 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. (Input all amounts as positive values.) July August September Third Quarter Production needs (Click to select)AddLess: Desired ending inventory Total Material H300 needs Less/Add: Beginning inventory Material H300 purchases
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