Question

Budgeted production, in bottles...... Year 2 Year 3 First Second Third Fourth First 60,000 90,000 150,000 100,000 70,000 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 36,000 grams of musk oil will be on hand to start the first quarter of Year 2. Required: Using Schedule 3 as your guide, prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Answer 1

Mink Caress Direct Material Budget - Year 2 Quarter First Second Third 60,000 90,000 150,000 Particulars Total Fourth 100,000 400,000 3 3 3 3 3 Production Units Unit of raw material needed per unit of finished goods Unit of raw material needed to meet production Add: Desired ending material inventory 180,000 270,000 450,000 300,000 1,200,000 54,000 90,000 60,000 14,000 218,000 Total Units of Raw Material Needed 234,000 360,000 510,000 314,000 1,418,000 36,000 54,000 90,000 60,000 240,000 Less: Beginning Material Inventory Units of raw material to be purchased Units cost of raw materials 420,000 198,000 1.5 306,000 1.5 254,000 1,178,000 1.5 1.5 1.5 Cost of raw material to purchased 297,000 459,000 630,000 381,000 1,767,000