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 $1.80 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3 Year2 First Second Third Fourth 66,000 96,000 156,000 106,000 Year3 First 76,000 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 39,600 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

Explanation / Answer

Mink cares Direct material Budget - Year 2 Quarter Particulars First Second Third Fourth Year Budgeted production              66,000              96,000            156,000            106,000                424,000 Units of raw material needed per units of finished goods                         3                         3                         3                         3                             3 Units of raw material needed to meet production            198,000            288,000            468,000            318,000            1,272,000 Opening raw material              39,600              57,600              93,600              63,600 Total Units of raw material needed            237,600            345,600            561,600            381,600            1,526,400 Closing raw material              57,600              93,600              63,600              15,200 Units of raw material to be purchased            216,000            324,000            438,000            269,600            1,247,600 Units of cost of raw material $               1.80 $               1.80 $               1.80 $               1.80 Cost of raw material to purchased $        388,800 $        583,200 $        788,400 $        485,280 $        2,245,680

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