Question

ch 7 exer #9

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
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 be purchased

Answer 1

Musk oil cost - $ 1.80/ gram

Remember :- TWO grams of musk oil are required for each bottle of Mink Caress

-->> Mink Caress

Direct Materials Budget - Year 2

Quarter

First Second Third Fourth Year Required Production 80,000 110,000 170,000 120,000 480000 Raw Materials

per Unit (gram) $2 $2 $2 $2 $2 Production

Needs (Gram) 160,000 220,000 340,000 240,000 960,000 Add: Desired Ending

Inventory. 44,000 68,000 48,000 36,000 196,000

Total Needs

(Gram) 204,000 288,000 388,000 276,000 1,156,000

Less:Beginning

Inventory. 32,000 44,000 68,000 48,000 192,000 Raw Materials to be

Purchased. 172,000 244,000 320,000 228,000 964,000 Cost per RM. $1.80 $1.80 $1.80 $1.80 $1.80 Cost of RM 309,600 439,200 576,000 410,400 1,735,200