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 $1.80 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 ourthFirst Budgeted production, in bottles 80,000 110,000 170,000 120,000 90,000 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. 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

Mink Caress Direct materials budget - Year 2 Quarter First Second Third Fourth Year Budgeted production                                         80,000                                      110,000                                      170,000                                      120,000                                          480,000 Units of raw material needed per unit of finished goods 2 gms 2 gms 2 gms 2 gms 2 gms Units of raw material needed to meet production 80,000*2 = 160,000 110,000*2 = 220,000 170,000*2 = 340,000 120,000*2 = 240,000 480,000*2 = 960,000 Add: Desired ending raw material inventory 220,000*20% = 44,000 340,000*20% = 68,000 240,000*20% = 48,000 90,000*2*20% = 36,000 90,000*2*20% = 36,000 Total units of raw materials needed                                      204,000                                      288,000                                      388,000                                      276,000                                          996,000 Less: Desired beginning raw material inventory                                         32,000 220,000*20% = 44,000 340,000*20% = 68,000 240,000*20% = 48,000                                             32,000 Units of raw materials to be purchased                                      172,000                                      244,000                                      320,000                                      228,000                                          964,000 Unit cost of raw materials $                                         1.80 $                                         1.80 $                                         1.80 $                                         1.80 $                                             1.80 Cost of raw material to be purchased 172,000*$1.80 = $309,600 244,000*$1.80 = $439,200 320,000*$1.80 = $576,000 228,000*$1.80 = $410,400 964,000*$1.80 = $1,735,200

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.