Question

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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 $190 per gram Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3 Budgeted production in bottles 2 First ,000 Second 112 000 Third 172,000 Fourth 122,00 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 32,800 grams of musk oil will be on hand to start the first quarter of Year 2 Required: Prepare a direct materials budget for muskoll by quarter and in total for Year 2 Mink Caress Direct Materials Bludget Year 2 Quarter First Second T Third Fourth to chedd as needed Utoww materials needed to production Total units of ww ma n ded U Units of raw materials to be purchased w material Cost of raw materials to purchased

Answer 1

Solution

MINK CARESS
Direct Material Budget
	Quarter
	January	February	March	Forth	Year
Budgeted Production (unis)	82000	112000	172000	122000	488000
Units of Raw material needed per unit of finished goods	2	2	2	2	2
Units of raw material needed to meet production	164000	224000	344000	244000	976000
Budgeted Ending Inventory (Grams)	44800	68800	48800	36800*	36800
Total Units of raw material needed	208800	292800	392800	280800	1012800
Beginning Inventory (Grams)	32800	44800	68800	48800	32800
Units of raw material to be purchased	176000	248000	324000	232000	980000
Unit cost of raw material	$                  1.90	$               1.90	$                 1.90	$                   1.90	$                  1.90
Cost of raw material to be purchased	$ 334,400	$ 471,200	$ 615,600	$ 440,800	$ 1,862,000

*92000 x 2 x 20%