Question

Four 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 92,000 122,000 182,000 132,000 102,000
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 73,600 grams of musk oil will be on hand to start the first quarter of Year 2.
Required:
1. 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.)

Answer 1

See the attached file below

Step-by-step explanation:

Step 1

Calculate unit of raw material needed by multiplying required production with units of raw material needed per unit of finished goods.

Step2

Now add desired ending inventory to units of raw material needed calculated in step 1. You'll get total units of raw material needed.

Step 3

Subtract beginning inventory from total units of raw material needed calculated in above step. You'll get total units of raw material to be purchased.

Step 4

Now multiply the unit cost of raw material with total units of raw material to be purchased to to get cost of raw material to be purchased.