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 $2.20 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 100,000 130,000 190,000 140,000 110,000 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 80,000 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.)

Answer 1

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.)

	First	Second	Third	Fourth	Year
Production units	100000	130000	190000	140000	560000
Raw material per unit	4	4	4	4	4
Raw material need for production	400000	520000	760000	560000	2240000
Add: Desired ending inventory	104000	152000	112000	88000	88000
Total needs	504000	672000	872000	648000	2328000
Less: Beginning inventory	-80000	-104000	-152000	-112000	-80000
Raw material purchase (QTY)	424000	568000	720000	536000	2248000
Cost per grams	2.2	2.2	2.2	2.2	2.2
Raw material purchase cost	932800	1249600	1584000	1179200	4945600