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 $1.70 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 78,000 Year 2 Second third Fourth 108,000 168,000 118,000 Year 3 First 88,000 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 31,200 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

BLUE Year 472,000 31 B Required production in units of finish goods 4 Units of raw material needed per unit of finished good 5 units of raw materials needed to meet production 5 Add: Desired units of ending raw material inventory 7 Total units of raw materials needed 3 Less units of beginning raw material inventory Units os raw material to be purchased 0 Unit cost of raw materials 1 Cost of raw materials to be purchased First 78,000 3 234,000 64,800 298,800 31,200 267,600 1.70 454,920 Quarter Second Third 108,000 168,000 3 324,000 504,000 100,800 70,800 424,800 574,800 64,800 100,800 360,000 474,000 1.70 1.70 612,000 805,800 Fourth 118,000 3 354,000 52,800 406,800 70,800 336,000 1.70 571,200 1,416,000 52,800 1,468,800 70,800 1,398,000 1.70 2,376,600

First 78000 Year Quarter Third 168000 Second 108000 Fourth 118000 =SUM(B3:E3) =F3F4 3 Required production in units of finish goods 4 Units of raw material needed per unit of finished good 5 units of raw materials needed to meet production 6 Add: Desired units of ending raw material inventory 7 Total units of raw materials needed 8 Less units of beginning raw material inventory 9 Units os raw material to be purchased 10 Unit cost of raw materials 11 Cost of raw materials to be purchased =B3 B4 20%*25 =B5+B6 31200 =B7-B8 =C3C4 = 20%D5 =C5-C6 =B6 =C7-C8 1.7 =C9*C10 =D3 D4 =20%E5 =D5+D6 =C6 =D7-08 -E3°E4 =20%*3*88000 =E5+E6 =D6 =E7-E8 =E6 =F5+F6 -E8 =F7-F8 1.7 1.7 1.7 =B96B10 =D9 D10 =E9*E10 =F96F10 12