Reference no: EM132978769

Question: Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia.

Three cubic centimetres (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:

The finished goods inventory on hand at the end of each month must be equal to 3,900 units of Fineclay plus 15% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 13,000 units.
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 is budgeted to be 70,200 cc of solvent Q80.
The company maintains no work-in-process inventories.

A sales budget for Fineclay for the last six months of the year follows:

Budgeted Sales in UnitsJuly 45,500 August 52,000 September 65,000 October 39,000 November 26,000 December 13,000

Required:

1. Prepare a production budget for Fineclay for the months of July to October.

2. This part of the question is not part of your Connect assignment.

3. Prepare a budget showing the quantity of solvent Q80 to be purchased for July, August, and September, and for the quarter in total.