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 $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:

Year 2

Year 3

    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 29,600 grams of musk oil will be on hand to start the first quarter of Year 2.

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.)

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 $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:

Explanation / Answer

direct materials budget first Second third total Budgeted production 74,000 104,000 164,000 342,000 114,000 grams per unit required 2 2 2 2 2 total grams required 148000 208000 328000 684000 228000 Add:ending inventory 41600 65600 45600 45,600 total needs 189600 273600 373600 729600 less:opening inventor 29600 41600 65600 29600 materials required 160000 232000 308000 700000 cost per gram 1.5 1.5 1.5 1.5 Material cost 240000 348000 462000 1050000

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