Four grams of musk oll are required for each bottle of Mink Caress, a very popul

Question

Four grams of musk oll are required for each bottle of Mink Caress, a very popular perfume made by a small company In westerr Slberla. The cost of the musk oll 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 3 First Year 2 First Second Third Fourth Budgeted production, in bottles 96,000 126,000 186,000 136,000106,000 Musk oll 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 oll at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 76,800 grams of musk oll will be on hand to start the first quarter of Year 2. Requlred Prepare a direct materlals budget for musk ol, by quarter and In total, for Year 2. (Round "Unlt cost of raw materials" answers to 2 declmal 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

Mink Caress Direct materials budget - Year 2 Quarter First Second Third Fourth Year Budgeted production                                         96,000                                          126,000                                          186,000                                      136,000                                              544,000 Units of raw material needed per unit of finished goods 4 gms 4 gms 4 gms 4 gms 4 gms Units of raw material needed to meet production 96,000*4 = 384,000 126,000*4 = 504,000 186,000*4 = 744,000 136,000*4 = 544,000 2176000 Add: Desired ending raw material inventory 504,000*20% = 100,800 744,000*20% = 148,800 544,000*20% = 108,800 106,000*4*20% = 84,800 106,000*4*20% = 84,800 Total units of raw materials needed                                      484,800                                          652,800                                          852,800                                      628,800 2260800 Less: Desired beginning raw material inventory                                         76,800 504,000*20% = 100,800 744,000*20% = 148,800 544,000*20% = 108,800                                                76,800 Units of raw materials to be purchased                                      408,000                                          552,000                                          704,000                                      520,000                                          2,184,000 Unit cost of raw materials $                                         1.90 $                                             1.90 $                                             1.90 $                                         1.90 $                                                 1.90 Cost of raw material to be purchased 408,000*$1.90 = $775,200 552,000*$1.90 = $1,048,800 704,000*$1.90 = $1,337,600 520,000*$1.90 = $988,000 2,184,000*$1.90 = $4,149,600

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