Question

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 $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:

    

	Year 2					Year 3
	First	Second	Third	Fourth		First
Budgeted production, in bottles	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:

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.) (Same table just showing the different tabs) Mink Caress Direct Materials Budget - Year 2 Quarter First Second Required production in units of finished goods Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Third Fourth Year Total units of raw materials needed 0 0 0 0 0 0 0 Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to purchased Mink Caress Direct Materials Budget - Year 2 Quarter First Second Required production in units of finished goods Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Third Fourth 0 0 Add: Desired units of ending raw materials inventory Add: Units of beginning raw materials inventory Less: Units of beginning raw materials inventory Less: Desired units of ending raw materials inventory 0 0 0 0 Mink Caress Direct Materials Budget - Year 2 Quarter First Second Required production in units of finished goods Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Third Fourth Year Total units of raw materials needed - 0 0 0 0 Add: Desired units of ending raw materials inventory Add: Units of beginning raw materials inventory Less: Units of beginning raw materials inventory Less: Desired units of ending raw materials inventory

Answer 1

	First	Second	Third	Fourth	Year
Required production in units of finished goods	60000	90000	150000	100000	400000
Units of raw materials needed per unit of finished goods	3	3	3	3	3
Units of raw materials needed to meet production	180000	270000	450000	300000	1200000
Add desired units of ending raw materials inventory	54000	90000	60000	42000	42000
Total units of raw materials needed	234000	360000	510000	342000	1242000
Less units of beginning raw materials inventory	36000	54000	90000	60000	36000
Units of raw materials to be purchased.	198000	306000	420000	282000	1206000
Unit cost of raw materials	1.50	1.50	1.50	1.50	1.50
Cost of raw materials to purchased	297000	459000	630000	423000	1809000