Three grams of musk oil are required for each bottle of Mink Caress, a very popu

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 ear 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 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 68,000 204,000 58,800 262,800 40,800 222,000 98,000 3 294,000 94,800 388,800 158,000 3 474,000 64,800 538,800 108,000 3 324,000 46,800 370,800 432,000 3 1,296,000 ess: Units of beginning raw materials inventory Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to be purchased 388,800 538,800 370,800

Explanation / Answer

Direct Materials Budget For Musk Oil Year 2 Year Year 3 First Second Third Fourth First Budgeted Production, in Bottels          68,000            98,000          158,000          108,000          432,000          78,000 Musk oil - Grams per Bottle                    3                       3                       3                       3                       3                    3 Production Needs in Grams       204,000          294,000          474,000          324,000      1,296,000       234,000 Add: Desired Ending Inventory - 20% of Next Qtr          58,800            94,800            64,800            46,800            46,800 Total Needs - in Grams       262,800          388,800          538,800          370,800      1,342,800 Less: Beginning Inventory - In Grams       (40,800)          (58,800)          (94,800)          (64,800)          (40,800) Musk oil to be Purchased       222,000          330,000          444,000          306,000      1,302,000 Cost of Musk Oil per Gram              1.90                 1.90                 1.90                 1.90                 1.90 Cost of raw materials to be purchased       421,800          627,000          843,600          581,400      2,473,800

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