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: First 60,000 Year 2 Second Third Fourth 90,000 150,000 100,000 Year 3 First 70,000 Budgeted production, in bottles 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.) Mink Caress Direct Materials Budget - Year 2 Quarter First Second Third Fourth Year Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Total units of raw materials needed Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to purchased

Answer 1

Direct material budget-Year 2

	First	Second	Third	fourth	Year
Units to be produced	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 ending inventory	54000	90000	60000	42000	42000
Total Units of raw materials needed	234000	360000	510000	342000	1242000
Less: Beginning raw material	-36000	-54000	-90000	-60000	-36000
Units of raw materials to be purchased	198000	306000	420000	282000	1206000
Unit cost of raw materials	1.5	1.5	1.5	1.5	1.5
Cost of raw materials to purchased	297000	459000	630000	423000	1809000