Question

Exercise 8-3 Direct Materials Budget [LO8-4) 3 Three 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 $180 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Stoped Budgeted production, in bottles First 66,000 Second 96,000 Third 156,060 Fourth 106,000 Year First 76,eee 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 39.600 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.) References Mink Caross Direct Materials Budget Year 2 Quarter First Second Third Fourth Units of raw materials needed perit of goods Units of raw mate needed to meet production Total units of raw materials needed Units of raw materials to be purchased Unit cost of raw materials Cost of materials to purchased

Answer 1

Mink Caress

Direct Materials Budget, Year 2

	First	Second	Third	Fourth	Year
Budgeted production in bottles	66,000	96,000	156,000	106,000	424,000
Units of raw material needed per unit of finished goods	3	3	3	3	3
Units of raw material needed to meet production	198,000	288,000	468,000	318,000	1,272,000
Ending inventory of materials	57,600 (288,000*20%)	93,600 (468,000*20%)	63,600 (318,000*20%)	45,600 (76,000*3*20%)	45,600
Total units of raw materials needed	255,600	381,600	531,600	363,600	1,317,600
Beginning inventory of raw materials	(39,600)	(57,600)	(93,600)	(63,600)	(39,600)
Units of raw materials to be purchased	216,000	324,000	438,000	300,000	1,278,000
Unit cost of raw materials	$1.8	$1.8	$1.8	$1.8	$1.8
Cost of raw materials to purchased	$388,800	$583,200	$788,400	$540,000	$2,300,400