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:
| Budgeted production,|
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
30% of the following quarterAc??cs production needs. Some 46,800 grams
of musk oil will be on hand to start the first quarter of Year
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 CaressDirect Materials|
Budget - Year 2QuarterFirstSecondThirdFourthYearRequired production
in units of finished goods156,000216,000336,000236,000944,000Units
of raw materials needed per unit of finished goodsUnits of raw
materials needed to meet productionAdd: Desired units of ending raw
materials inventory64,800100,80070,80026,400262,800Total units of
raw materials needed64,800100,80070,80026,400262,800Less: Units of
beginning raw materials inventoryUnits of raw materials to be
purchased64,800100,80070,80026,400262,800Unit cost of raw
materialsCost of raw materials to purchased
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