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 $1.70 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	78,000	108,000	168,000	118,000	88,000

The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarters production needs. Some 31,200 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.

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: The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 31,200 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