Question

Two 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 $1.70 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	78,000	108,000	168,000	118,000		88,000

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 31,200 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 88,000 108,000 168,000 118,000 88,000 Units of raw materials needed per unit of finished goods 2 2 2 2 2 Units of raw materials needed to meet production 176,000 216,000 336,000 236,000 176,000 Add: Desired units of ending raw materials inventory Total units of raw materials needed 176,000 216,000 336,000 236,000 Less: Units of beginning raw materials inventory 35,200 43,200 67,200 47,200 Units of raw materials to be purchased 140,800 172,800 268,800 188,800 0 Unit cost of raw materials $1.70 $1.70 $1.70 $1.70 $1.70 Cost of raw materials to purchased $239,360 $293,760 $456,960 $320,960

Answer 1