Two grams of musk oil are required for each bottle of Mink Caress, a very popula

Question

Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.90 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year FirstSecond Third Fourth 82,600 112,000 172,0 122,80 Year First 92,000 Budgeted production, in bottles Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 32,800 grams of musk oil will be on hand to start the first quarter of Year 2 Required: Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. (Round "Unit cost of raw materials" answers to 2 decimal places.) Mink Caress Direct Materials Budget- Year 2 Quarter First Second Third Fourth Year Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Total units of raw materials needed Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to purchased

Explanation / Answer

Statement showing Materials Budget Year 2 Year 3 Particulars 1 2 3 4 Year                                       1.00 Required production in unit of finished goods                   82,000.00                112,000.00                172,000.00                122,000.00                488,000.00                            92,000.00 Units of raw material needed per unit of finished good                             2.00                             2.00                             2.00                             2.00                             2.00                                       2.00 Units of raw material needed to meet production                164,000.00                224,000.00                344,000.00                244,000.00                976,000.00                          184,000.00 Ending Raw Materials at 20%                   44,800.00                   68,800.00                   48,800.00                   36,800.00                   36,800.00 Total units of raw material needed                208,800.00                292,800.00                392,800.00                280,800.00             1,012,800.00 Less Beginning raw material                   32,800.00                   44,800.00                   68,800.00                   48,800.00                   32,800.00 Unit of raw material to be purchased                176,000.00                248,000.00                324,000.00                232,000.00                980,000.00 Unit cost of raw materials                             1.90                             1.90                             1.90                             1.90                             1.90 Cost of raw materials to be purchased                334,400.00                471,200.00                615,600.00                440,800.00             1,862,000.00

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