1.
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
Solution
Production budget of Supermix:
Notes for calculation:
a. ending inventory for each month = 2000+25% of next month's sales. So, ending inventory for
July = 2,000+20% of 42,000 (august sales) = 12,500
b. Production for each month = opening inventory + budgeted sales - ending inventory
DIRECT MATERIALS budget:
Notes on calculation: solvent's purchase requirement in a month = no. of units of supermix
produced * 3cc
Months Opening Inventory Ending inventory Budgeted sales Supermix production
July 11,250 12,500 37,000 35,750
August 15,000 42,000 27,000
September 10,000 52,000 42,000
October 7,500 32,000 24,500
November 22,000