Two grams of musk oil are required for each bottle of Mink C

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 rst Second Third Fourth audgeted production, in bottlen,008,006, 10 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 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

Solution

Mink Caress Direct Materials Budget - Year 2 Quarter First Second Third Fourth Year Required Production             78,000          108,000          168,000          118,000          472,000 Units of raw materials needed per unit of finished goods 2 2 2 2 2 Units of raw materials needed to meet production          156,000          216,000          336,000          236,000          944,000 Add Ending raw materials inventory             43,200            67,200            47,200            35,200            35,200 (88000 x 2 x 20%) Total units of raw materials needed          199,200          283,200          383,200          271,200          979,200 Less: Beginning Inventory             31,200            43,200            67,200            47,200            31,200 Units of raw materials to be purchased          168,000          240,000          316,000          224,000          948,000 Unit cost of raw materials $1.70 $1.70 $1.70 $1.70 $1.70 Cost of raw materials to purchased $285,600 $408,000 $537,200 $380,800 $1,611,600