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 $1.50 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 60,000 90,000 150,000 100,000 Year 3 First 70,000 Budgeted production, in bottles Musk oil has become so popular as a perfume ingredient that it has become necessary to carry la 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 quarters production needs Some 36.000 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.) Mink Caress Direct Materials Budget- Year 2 Quarter First Second Third 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 60,000 90,000 150.000 180.000 270 000 450,000 180 000 270.000 Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to be purchased 180 000 270.000 1 50 S 21

Explanation / Answer

Mink cares Direct material Budget - Year 2 Quarter Particulars First Second Third Fourth Year Required production in units finished goods        60,000        90,000      150,000      100,000          400,000 Units of raw material needed per units of finished goods                   3                   3                   3                   3                       3 Units of raw material needed to meet production      180,000      270,000      450,000      300,000      1,200,000 Opening raw material        36,000        54,000        90,000        60,000 Total Units of raw material needed      234,000      360,000      510,000      314,000 Closing raw material        54,000        90,000        60,000        14,000 Units of raw material to be purchased      198,000      306,000      420,000      254,000      1,178,000 Units of cost of raw material $         1.50 $         1.50 $         1.50 $         1.50 Cost of raw material to purchased $ 297,000 $ 459,000 $ 630,000 $ 381,000 $ 1,767,000

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