Exercise 8-3 (Algo) Direct Materials Budget [LO8-4]

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 $1.60 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	76,000	106,000	166,000	116,000	86,000

The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarters production needs. Some 30,400 grams of musk oil will be on hand to start the first quarter of Year 2.

Required:

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

Mink Caress
Direct Materials Budget - Year 2
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Year
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