Question

Need to Find the Add: Desired units of ending raw materials inventory & Less: Units of beginning raw materials inventory

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 $2.10 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 First Second Third Fourth 70,000 100,000 160,000 110,000 Year 3 First 80,000 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 30% of the following quarter’s production needs. Some 63,000 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.)

Answer 1

Direct materials budget for musk oil, by quarter and in total, for Year 2 should be prepared as follows Mink Caress Direct Materials Budget Year 2 uarter First Second Third Fourth Year Required production in units of 5 finished goods 70.000100,000 160,000 110.000 440,000 Units of raw materials needed per unit of finished goods Units of raw materials needed to meet 6 7 production 210,000300,000 480,000 330,0001,320,000 Add: Desired units of ending raw 8 materials inventory 9 Total units of raw materials needed 300,000 444.000 579,000 402.000 1392,000 90,000 144,000 99,000 72,000 72,000 Less: Units of beginning raw materials 10inventory 1 Units of raw materials to be purchased 237,000 354,000 435,000 303,000 1,329,000 2Unit cost of raw materials 13 Cost of raw materials to be purchased 497,700 743,400 913,500 636,300 2,790,900 63,000 90,000 144,000 99.000 63,000 2.10 2.10 2.10 2.10 2.10 Above figures have been calculated in the following manner: Mink Caress Direct Materials Budget Year 2 uarter 4 First Second Third Fourth Year Required production in units of 5 finished 700001 00000160000110000 SUM(B5:E5) Units of raw materials needed per unit 6 of finished goods Units of raw materials needed to meet -F5 F6 Add: Desired units of ending raw 8 materials inventory 9 Total units of raw materials needed B7+B8 C7+C8 D7+D8 E7+E8 F7+F8 Less: Units of beginning 0 inventory 11 Units of raw materials to be purchased-B9-B10 |=C9-C10 -D9-D10 -E9-E10 12 Unit cost of raw materials 13 Cost of raw materials to be purchased -B11 B12 C11 C12-D11 D12E11 E12F11 F12 raw materials B 10 F9-F10 63000 -B8 -D8 2.1