Two grams of musk oil are required for each bottle of Mink Caress, a very popula
ID: 2395512 • Letter: T
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 $1.80 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 32,000 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.)
What is the desired units of ending raw materials inventory for each quarter?
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 $1.80 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 Material Budget
For Year 2
Year 2
First
Second
Third
Fourth
Total
Units of Mink Caress to be produced
80,000
110,000
170,000
120,000
480,000
Musk oil material requirement per units (in gm)
2
2
2
2
2
Material needed for production (in gm)
160,000
220,000
340,000
240,000
960,000
Add: Ending material inventory
44,000
68,000
48,000
36,000
36,000
Total material requirement
204,000
288,000
388,000
276,000
996,000
Less: Beginning material inventory
32,000
44,000
68,000
48,000
32,000
Materials to be purchased (in gm)
172,000
244,000
320,000
228,000
964,000
Cost of material per gm
$ 1.80
$ 1.80
$ 1.80
$ 1.80
$ 1.80
Total Budgeted direct materials cost
$ 309,600
$ 439,200
$ 576,000
$ 410,400
$ 1,735,200
Direct Material Budget
For Year 2
Year 2
First
Second
Third
Fourth
Total
Units of Mink Caress to be produced
80,000
110,000
170,000
120,000
480,000
Musk oil material requirement per units (in gm)
2
2
2
2
2
Material needed for production (in gm)
160,000
220,000
340,000
240,000
960,000
Add: Ending material inventory
44,000
68,000
48,000
36,000
36,000
Total material requirement
204,000
288,000
388,000
276,000
996,000
Less: Beginning material inventory
32,000
44,000
68,000
48,000
32,000
Materials to be purchased (in gm)
172,000
244,000
320,000
228,000
964,000
Cost of material per gm
$ 1.80
$ 1.80
$ 1.80
$ 1.80
$ 1.80
Total Budgeted direct materials cost
$ 309,600
$ 439,200
$ 576,000
$ 410,400
$ 1,735,200
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