Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimeters (cc)
Question:
Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia.
Three cubic centimeters (cc) of solvent Q80 are required to manufacture each unit of Fineclay, 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 Fineclay 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 1,800 units of Fineclay plus 15% of the next month's sales. The finished goods Inventory on June 30 is budgeted to be 6,000 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 1is budgeted to be 32,400 cc of solvent Q80.
c. The company maintains no work-In-process inventories.
3. Prepare a budget showing the quantity of solvent Q80 to be purchased for July, August, and September, and for the quarter In total.