Question

Exercise 8-3 Direct Materials Budget (LO8-4] 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 $1.50 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 First Second Third Yourth 74,000 104,000 164,000 116,000 Pirst 84,000 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 29,600 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 Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production

Answer 1

Solution:

Direct materials Budget - Mink Caress
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Budgeted Production Units	74000	104000	164000	114000	456000
Material needed per unit	2	2	2	2	2
Material needed for budgeted production	148000	208000	328000	228000	912000
Add: Budgeted ending inventory (20% of next quarter material requirements)	41600	65600	45600	33600	33600
Total material requirements	189600	273600	373600	261600	945600
Less: Beginning inventory	29600	41600	65600	45600	29600
Materials to be purchased (units)	160000	232000	308000	216000	916000
Cost per gram	$1.50	$1.50	$1.50	$1.50	$1.50
Total budgeted direct materials cost	$240,000.00	$348,000.00	$462,000.00	$324,000.00	$1,374,000.00