Question

33 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 $1.90 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 Fourth First Second Third First 106,000 Eudgeted production, in bottles 96,000 126, 000 186,000 136, 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 musk oil, by quarter and in total, for Year 2. (Round "Unit cost of raw materlals" answers to 2 declmal 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

	First	Second	Third	Fourth	Year
Required production in units	96000	126000	186000	136000	544000
Units of raw materials needed per unit of finished goods	4	4	4	4	4
Units of raw materials needed to meet production	384000	504000	744000	544000	2176000
Add: Desired ending inventory	100800	148800	108800	84800	84800
Total units of raw materials needed	484800	652800	852800	628800	2260800
Less: Beginning inventory	-76800	-100800	-148800	-108800	-76800
Units of raw materials to be purchased	408000	552000	704000	520000	2184000
Unit cost of raw materials	1.9	1.9	1.9	1.9	1.9
Cost of raw materials to purchased	775200	1048800	1337600	988000	4149600