Three grams of musk oil are required for each bottle of Mink

jagguarpaw January 19, 2017 0 Comments

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.)