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
	First	Second	Third	Fourth	First
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	80,000	110,000	170,000	120,000	480,000
Units of raw materials needed per unit of finished goods
Units of raw materials needed to meet production
Add: Desired units of ending raw materials inventory
Total units of raw materials needed
Less: Units of beginning raw materials inventory
Units of raw materials to be purchased
Unit cost of raw materials	$1.80	$1.80	$1.80	$1.80
Cost of raw materials to purchased	$	$

Answer 1

Mink Caress
Direct Materials Budget - Year 2
	Quarter
	First	Second	Third	Fourth	Year
Required production in units of finished goods	80,000	110,000	170,000	120,000	480,000
Units of raw materials needed per unit of finished goods	2	2	2	2	2
Units of raw materials needed to meet production	160000	220000	340000	240000	960000
Add: Desired units of ending raw materials inventory	44000	68000	48000	36000	36000
Total units of raw materials needed	204000	288000	388000	276000	996000
Less: Units of beginning raw materials inventory	32000	44000	68000	48000	32000
Units of raw materials to be purchased	172000	244000	320000	228000	964000
Unit cost of raw materials	$1.80	$1.80	$1.80	$1.80	$1.80
Cost of raw materials to purchased	$309,600	$439,200	$576,000	$410,400	$1,735,200