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 $1.90 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3 First Sec 96,000 126,000 186,000 136,000 Year2 nd Third Fourth Year3 First 106,000 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 76,800 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 to2 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

Explanation / Answer

First Second Third Fourth Year Required production in units of finished goods 96000 126000 186000 136000 544000 Units of raw materials needed per unit of finished goods 4 4 4 4 4 Units of raw materials needed to meet production 384000 504000 744000 544000 2176000 Add: Desired units of ending raw materials inventory 100800 148800 108800 84800 84800 Total units of raw materials needed 484800 652800 852800 628800 2260800 Less: Units of beginning raw materials inventory 76800 100800 148800 108800 76800 Units of raw materials to be purchased 408000 552000 704000 520000 2184000 Unit cost of raw materials 1.9 1.9 1.9 1.9 1.9 Cost of raw materials to purchased 775200 1048800 1337600 988000 4149600

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