Question

Four 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:

	Year 2					Year 3
	First	Second	Third	Fourth		First
Budgeted production, in bottles	98,000	128,000	188,000	138,000		108,000

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 78,400 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 Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Total units of raw materials needed Units of raw materials to be purchased Unit cost of raw materials Cost of raw materials to purchased

Answer 1

Mink Caress
Direct Materials Budget - Year 2
	Quarter
	First	Second	Third	Fourth	Year
Budgeted units to be produced	98,000	128,000	188,000	138,000	552,000
Units of raw materials needed per unit of finished goods	4	4	4	4	4
Units of raw materials needed to meet production	392,000	512,000	752,000	552,000	2,208,000
Add: Desired raw material ending inventory	102,400	150,400	110,400	86,400	86,400
Total units of raw materials needed	494,400	662,400	862,400	638,400	2,294,400
Less: Beginning raw material inventory	78,400	102,400	150,400	110,400	78,400
Units of raw materials to be purchased	416,000	560,000	712,000	528,000	2,216,000
Unit cost of raw materials	$2.10	$2.10	$2.10	$2.10	$2.10
Cost of raw materials to purchased	$873,600	$1,176,000	$1,495,200	$1,108,800	$4,653,600