Question

Four 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. First 96,000 Year 2 Second Third 126,000 186,000 Fourth 136,000 Budgeted production, in bottles 106,000 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 76.800 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 decimal places.) (Round "Unit cost of raw materials" answers to Mink Caress Direct Materials Budget - Year 2

Answer 1

Solution 1:

Mink caress
Direct materials Budget
Particulars	First	Second	Third	Fourth	Year
Budgeted Production in Bottles	96000	126000	186000	136000	544000
Units of raw materials needed per unit	4	4	4	4	4
Units of raw materials needed to meet production	384000	504000	744000	544000	2176000
Add: ending inventory units of Raw Materials (20%)	100800	148800	108800	84800	84800
Total Units of raw materials needed	484800	652800	852800	628800	2260800
Less: Beginning inventory units of Raw Materials	76800	100800	148800	108800	76800
Units of Raw Materials to be purchased	408000	552000	704000	520000	2184000
Unit Cost of Raw Materials	$1.90	$1.90	$1.90	$1.90	$1.90
Cost of Raw materials to purchased	$7,75,200	$10,48,800	$13,37,600	$9,88,000	$41,49,600

Solution 2:

Computation of expected cash collection for december - Ashton company
Particulars	Amount
Cash Sales	$92,000.00
Collection of credit sales from October ($485,000*18%)	$87,300.00
Collection of credit sales from November ($568,000*60%)	$3,40,800.00
Collection of credit sales from December ($663,000*20%)	$1,32,600.00
Total Expected Cash Collection	$6,52,700.00
Computation of expected cash disbursement for merchandise purchase in december - Ashton company
Particulars	Amount
Payment to suppliers:
November purchases	$1,62,000.00
December Purchases ($316,000*30%)	$94,800.00
Total Cash payments	$2,56,800.00

Cash Budget for December - Ashton company
Particulars	Amount
Beginning cash balance	$58,600.00
Add: Cash collection from customers	$6,52,700.00
Total cash available	$7,11,300.00
Less: Cash disbursements:
Payments to supplier for inventory	$2,56,800.00
Selling and administrative expenses (514000-52000)	$4,62,000.00
New web server	$1,17,500.00
Dividend payments	$12,500.00
Total cash disbursements	$8,48,800.00
Excess (Deficiency) of cash available over disbursements	-$1,37,500.00
Financing:
Borrowings	$1,57,500.00
Repayments	$0.00
Interest	$0.00
Total financing	$1,57,500.00
Ending Cash balance	$20,000.00