exercise 8-3

Exercise 8-3 Direct Materials Budget [LO8-4) 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 $160 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 Second ThirdFourth 120,000 180,000 130,000 Year 3 First First 90,000 Budgeted production, in bottles 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 oll at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 72.000 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. (Round "Unit cost of raw materials" answers to 2 decimal places.) Mink Caress Direct Materials Budget - Year 2 Mink Caress __ First Second Third Third Fourth Fourth Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Total units of raw materials needed 1 / / / 11 / Units of raw materials to be purchased Unt cost of raw materials Cost of raw materials to purchased EL / / 7