Question: 9-3 three grams of musk oil are required for each…
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 $1.70 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 | 64,000 | 94,000 | 154,000 | 104,000 | 74,000 |
Musk oil has become as 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 38,400 grams of musk oil will be on hand to start the first quarter of Year 2.
Required:
| 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 | |||||
| Total units of raw materials needed | |||||
| Units of raw materials to be purchased | |||||
| Unit cost of raw materials | |||||
| Cost of raw materials to purchased | |||||
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.)
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