Three grams of musk oil are required for each bottle of Mink Caress, a very popu
ID: 2514067 • 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 $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 First Second Third Fourth 68,000 98,000 158,000 108,000 Year 3 First 78,000 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 40,800 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 materials" answers to 2 decimal places.) Mink Caress Direct Materials Budget - Year 2 Quarter First Second Third Fourth Year 68,000 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 98,000 158,000 108,000 432,000 204,000 58,800 262,800 294,000 94,800 388,800 474,000 64,800 538,800 324,000 1,296,000 324,000 ess: Units of beginning raw materials inventory Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to purchased 262,800 388,800 538,800 324,000 1.90 $ 1.90 $ 1.90 $ 1.90 $ 1.90 S 499,320 S 738,720$ 1,023,720$615,600Explanation / Answer
First Second Third Fourth Year Required production in units of finishedgoods 68000 98000 158000 108000 432000 Units of raw materials needed per unit of finished goods 3 3 3 3 3 Units of raw materials needed to meet production 204000 294000 474000 324000 1296000 Add desired units of ending raw materials inventory 58800 94800 64800 46800 46800 Total units of raw materials needed 262800 388800 538800 370800 1342800 Less units of beginning raw materials inventory 40800 58800 94800 64800 40800 Units of raw materials to be purchased. 222000 330000 444000 306000 1302000 Unit cost of raw materials 1.9 1.9 1.9 1.9 1.9 Cost of raw materials to purchased 421800 627000 843600 581400 2473800