Four grams of musk oil are required for each bottle of Mink Caress, a very popul

Question

Four 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 $1.60 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 90,000 120,000 180,000 130,000 Year 3 First 100,000 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 72,000 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 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

First Second Third Fourth Year Required production in units of finished goods 90000 120000 180000 130000 520000 Units of raw materials needed per unit of finished goods 4 4 4 4 4 Units of raw materials needed to meet production 360000 480000 720000 520000 2080000 Add: Desired units of ending raw materials inventory 96000 144000 104000 80000 80000 Total units of raw materials needed 456000 624000 824000 600000 2160000 Less: Units of beginning raw materials inventory 72000 96000 144000 104000 72000 Units of raw materials needed to be purchased 384000 528000 680000 496000 2088000 Unit cost of raw materials 1.6 1.6 1.6 1.6 1.6 Cost of raw materials to purchased 614400 844800 1088000 793600 3340800

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