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 3 First 92,000 Year 2 Third Fourth First 82,000 112,000 172,000 122,000 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 Required production in units of finished goods Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production dd: Desired units of ending raw materials inventory Total units of raw materials needed ess: Units of beginning raw materials inventory Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to be purchased

Explanation / Answer

Direct material budget :

First second Third Fourth Year Required production in units of finished goods 82000 112000 172000 122000 488000 Units of raw materials needed per unit of finished goods 2 2 2 2 2 Units of raw materiald needed to meet production 164000 224000 344000 244000 976000 Add: Desired units of ending raw material inventory 44800 68800 48800 36800 36800 Total units of raw materials needed 208800 292800 392800 280800 1012800 Less: Units of beginning raw materials inventory (32800) (44800) (68800) (48800) (32800) Units of raw materials to be purchased 176000 248000 324000 232000 980000 Unit cost of raw materials 1.90 1.90 1.9 1.9 1.9 Cost of raw materials to be purchased 334400 471200 615600 440800 1862000

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