Three grams of musk oil are required for each bottle of Mink Caress, a very popu

Question

Three 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 $2.20 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 First Second Third Fourth 72,000 102,000 162,000 112,000 Ycar 3 First 82,000 Budgeted production, in bottles Musk oll has become so popular as a perfume ingredlent 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 43,200 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 Total units of raw materials needed Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to be purchased

Explanation / Answer

Statement showing Materials Budget Year 2 Total Year 3 Particulars Q1 Q2 Q3 Q4 Q1 Required production in unit of finished goods            72,000.00    102,000.00        162,000.00    112,000.00        448,000.00      82,000.00 Units of raw material needed per unit of finished good                       3.00                 3.00                     3.00                 3.00                     3.00                 3.00 Units of raw material needed to meet production          216,000.00    306,000.00        486,000.00    336,000.00    1,344,000.00    246,000.00 Ending Raw Materials at 20%            61,200.00      97,200.00          67,200.00      49,200.00          49,200.00 Total units of raw material needed          277,200.00    403,200.00        553,200.00    385,200.00    1,393,200.00 Less Beginning raw material            43,200.00      61,200.00          97,200.00      67,200.00          43,200.00 Unit of raw material to be purchased          234,000.00    342,000.00        456,000.00    318,000.00    1,350,000.00 Unit cost of raw materials                       2.20                 2.20                     2.20                 2.20                     2.20 Cost of raw materials to be purchased          514,800.00    752,400.00    1,003,200.00    699,600.00    2,970,000.00

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