Pearl Products Limited of Shenzhen, China, manufactures anddistributes toys throughout South East Asia. Three cubiccentimeters (cc) of solvent H300 are required to manufacture eachunit of Supermix, one of the company’s products. The company now isplanning raw materials needs for the third quarter, the quarter inwhich peak sales of Supermix occur. To keep production and salesmoving smoothly, the company has the following inventoryrequirements: The finished goods inventory on hand at the end ofeach month must equal 4,000 units of Supermix plus 20% of the nextmonth’s sales. The finished goods inventory on June 30 is budgetedto be 14,200 units. The raw materials inventory on hand at the endof each month must equal one-half of the following month’sproduction needs for raw materials. The raw materials inventory onJune 30 is budgeted to be 78,000 cc of solvent H300. The companymaintains no work in process inventories. A monthly sales budgetfor Supermix for the third and fourth quarters of the year follows.Budgeted Unit Sales July 51,000 August 56,000 September 66,000October 46,000 November 36,000 December 26,000 Required: 1. Preparea production budget for Supermix for the months July, August,September, and October. 3. Prepare a direct materials budgetshowing the quantity of solvent H300 to be purchased for July,August, and September, and for the quarter in total.
