Pearl Products Limited of Shenzhen, China, manufactures and distributes toys
throughout South East Asia. Three cubic centimeters cc of solvent 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
units of Supermix plus of the next month's sales. The finished goods inventory
on June is budgeted to be units.
b The raw materials inventory on hand at the end of each month must equal onehalf
of the following month's production needs for raw materials. The raw materials
inventory on June is budgeted to be cc of solvent
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.
Required:
Prepare a production budget for Supermix for the months July, August, September,
and October.
Prepare a direct materials budget showing the quantity of solvent to be
purchased for July, August, and September, and for the quarter in total.