PROBLEM 9–15 Production and Direct Materials Budgets [LO3, LO4]Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout SouthEast Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit ofSupermix, one of the company's products. The company is now planning raw materials needs for402Chapter 9the third quarter, the quarter in which peak sales of Supermix occur. To keep production and salesmoving smoothly, the company has the following inventory requirements:The finished goods inventory on hand at the end of each month must be equal to 3,000 units ofSupermix plus 20% of the next month's sales. The finished goods inventory on June 30 isbudgeted to be 10,000 units.b.a.The raw materials inventory on hand at the end of each month must be equal to one-half of thefollowing month's production needs for raw materials. The raw materials inventory on June30 is budgeted to be 54,000 cc of solvent H300.The company maintains no work in process inventories.A sales budget for Supermix for the last six months of the year follows.c.Budgeted Salesin UnitsJuly ..August.SeptemberOctober.November.35,00040,00050,00030,00020,00010,000December..Required:1. Prepare a production budget for Supermix for the months July, August, September, andOctober.2.Examine the production budget that you prepared in (1) above. Why will the company pro-duce more units than it sells in July and August, and fewer units than it sells in September andOctober?3.Prepare a direct materials budget showing the quantity of solvent H300 to be purchased forJuly, August, and September, and for the quarter in total.

The production budget acts as a financial plan where the list out the information about the number…

PROBLEM 9-15 Production and Direct Materials Budgets [LO3, LO4] Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three 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 Chapter 9 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 3,000 units of Supermix plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 10,000 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the foll wing month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 54,000 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... August.. September 35,000 40,000 50,000 .... . 30,000 20,000 October.. November December. 10,000 Required: 1. Prepare a production budget for Supermix for the months July, August, September, and October. 2. Examine the production budget that you prepared in (1) above. Why will the company pro- duce more units than it sells in July and August, and fewer units than it sells in September and October? 3. 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.

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter27: Lean Principles, Lean Accounting, And Activity Analysis

Section: Chapter Questions

Problem 27.1APR