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 $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 3 First Year 2 First 60,000 90,000 Third 150,000 Fourth 100,000 70,000 Second 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 36,000 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 purchased

Explanation / Answer

Calculate units of raw material needed to be purchased in the year 2 as follows:

Explanation:

Note 1: Desired units of ending raw materials inventory

First = 270,000 * 20% = 54,000

Second = 450,000 * 20% = 90,000

Third = 300,000 * 20% = 60,000

Fourth = 70,000 * 3 = 210,000 * 20% = 42,000

MC Direct Materials - Year 2 Quarter First Second Third Fourth Year Required production in units of finished goods 60,000 90,000 150,000 100,000 400,000 Units of raw materials needed per unit of finished goods 3 3 3 3 3 Units of raw materials needed to meet production 180,000 270,000 450,000 300,000 1,200,000 Add: Desired units of ending raw materials inventory (Note 1) 54,000 90,000 60,000 42,000 246,000 Total units of raw materials needed 234,000 360,000 510,000 342,000 1,446,000 Less: Units of beginning raw materials inventory 36,000 54,000 90,000 60,000 240,000 Units of raw materials to be purchased 198,000 306,000 420,000 282,000 1,206,000 Unit cost of raw materials $1.50 $1.50 $1.50 $1.50 $1.50 Cost of raw materials to purhased $297,000 $459,000 $630,000 $423,000 $1,809,000

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