Three grams of musk oil are required for each bottle of Mink Caress, a very popu
ID: 2402450 • Letter: T
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 $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:
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 42,000 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.)
Year 2 Year 3 First Second Third Fourth First Budgeted production, in bottles 70,000 100,000 160,000 110,000 80,000 Check decimal places.) Mink CareSS Direct Materials Budget -Year 2 Quarter First Second Third Fourth Year 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 Add: Desired units of ending raw materials inventory Total units of raw materials needed Less: Units of beginning raw materials inven Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to purchased 70,000 100,000 160,000 110,000 440,000 210,000 300,000 480,000 330,000 1,320,000 2.10 $ 2.10f s 2.10 $ 2.10 $ 2.10Explanation / Answer
Direct material budget
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Q1 Q2 Q3 Q4 Year Required production in units of finished goods 70000 100000 160000 110000 440000 Units of raw material needed per unit 3 3 3 3 3 Units of raw material needed 210000 300000 480000 330000 1320000 Add: desired closing inventory @20%of next quarter 60000 96000 66000 80000*3*20% =48000 270000 Total units of raw material needed 270000 396000 546000 378000 1590000 Less: opening inventory 42000 60000 96000 66000 264000 Units of raw material to be purchased 228000 336000 450000 312000 1326000 Unit cost $2.10 $2.10 $2.10 $2.10 $2.10 Cost of raw material to be purchased $478800 $705600 $945000 $655200 $2784600