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 $1.80 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	94,000	124,000	184,000	134,000	104,000

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 quarters production needs. Some 75,200 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. (Round "Unit cost of raw materials" answers to 2 decimal places.)

QUESTION: Hi, I already have the answer to this question but I was wondering how the Units of raw materials needed per unit of finished goods is calculated? Where does the 4 come from? If someone can break down the steps or method of finding it that would be extremely helpful.

Answer Mink Caress Direct Materials Budget Year 2 Quarter Year Required Production in Units of Finished Goods Units of Raw Materials needed per unit of Finished Goods Units of Raw Materials needed to meet production Add: Desied Units of Ending Raw Materials Inventory Total Units of Raw Materials Needed Less: Units of Beginning raw Materials Inventory Units of Raw Materials to be purchased Unit Cost of Raw Materials Cost of Raw Materials to purchased First 94000 4 376000 99200 475200 75200 400000 1.8 720000 Second 124000 4 496000 147200 643200 99200 544000 1.8 979200 Third 184000 4 736000 107200 843200 147200 696000 1.8 1252800 Fourth 134000 4 536000 83200 619200 107200 512000 1.8 921600 536000 4 2144000 83200 2227200 75200 2152000 1.8 3873600 Calculation Edning inventory, Fourth Quarter-104,000 * 4 * 20% 83,200