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Two grams of musk oll are required for each bottle of Mink Caress
Two grams of musk oll are required for each bottle of Mink Caress. a very popular perfume made by a smail company In western
Siberia. The cost of the musk oll Is $2.10 per gram. Budgeted production of Mink Caress ts 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 84,9000 114,000 174,e¢08 124,008 94,880
—
Musk oil has become so popular as a perfume Ingredient that tt has become necessary to carry large Inventories as a precaution
agalnst stock-outs. For this reason. the Inventory of musk oll at the end of a quarter must be equal to 20% of the following quarter's
production needs. Some 33,600 grams of musk oll will be on hand to start the first quarter of Year 2.
Required:
Prepare a direct materials budget for musk oll, by quarter and In total, for Year 2. (Round "Unit cost of raw materials” answers to 2
decimal places.)
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Expert Solution
Workings:
Ending Inventory Units of Raw Materials for Fourth Quarter = 94,000*2*20% = 37,600
| Mink caress | |||||
| Direct materials Budget | |||||
| Particulars | First | Second | Third | Fourth | Year |
| Budgeted Production in Bottles | 84000 | 114000 | 174000 | 124000 | 496000 |
| Units of raw materials needed per unit | 2 | 2 | 2 | 2 | 2 |
| Units of raw materials needed to meet production | 168000 | 228000 | 348000 | 248000 | 992000 |
| Add: Ending inventory units of Raw Materials (20%) | 45600 | 69600 | 49600 | 37600 | 37600 |
| Total Units of raw materials needed | 213600 | 297600 | 397600 | 285600 | 1029600 |
| Less: Beginning inventory units of Raw Materials | 33,600 | 45600 | 69600 | 49600 | 33,600 |
| Units of Raw Materials to be purchased | 180,000 | 252,000 | 328,000 | 236,000 | 996,000 |
| Unit Cost of Raw Materials | $2.10 | $2.10 | $2.10 | $2.10 | $2.10 |
| Cost of Raw materials to purchased | $378,000.00 | $529,200.00 | $688,800.00 | $495,600.00 | $2,091,600.00 |
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