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 $1.90 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3.

Y2 First Y2 Second Y2 Third Y2 Fourth Y3 First

Budgeted production, in bottles 96,000 126,000 186,000 136,000 104,000


Required:

Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Answer 1

Answer and Explanation:

The preparation of Direct material budget is shown below:-

First Second Third Fourth Year

Required production

in units of

Finished Goods $96,000 $126,000 $186,000 $136,000 $544,000

Units of raw material

needed per unit of

Finished Goods 4 4 4 4 4

Units of raw material

needed to meet

production $384,000 $504,000 $744,000 $544,000 $2,176,000

Add: Desired ending

Finished goods $100800 $148,800 $108,800 $84,800 $84,800

Total units of

Raw material

needed $484,800 $652,800 $852,800 $628,800 $2,260,800

Less: Beginning

inventory ($76,800) ($100,800) ($148,800) ($108,800) ($76,800)

Units of raw material

to be purchased $408,000 $552,000 $704,000 $520,000 $2,184,000

Units cost of Raw

Material $1.90 $1.90 $1.90 $1.90 $1.90

Cost of Raw Material

Purchased $775,200 $1,048,800 $1,337,600 $988,000 $4,149,600