Module $9-3$

Three litres of oil are required for each bottle of Caress, a very popular perfume made by a small company in Canada. The cost of the oil is $$1\mathrm{.}50$ per litre. Budgeted production of Caress is given below by quarters for Year $2$ and for the first quarter of Year $3$:

Year $2$

Year $3$

Arst

Second

Third

Fourth

First

Budgeted production, in battles

$60,000$

$90,000$

$150,000$

$100,000$

$70,000$

The 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 oil at the end of a quarter must be equal to $20\%$ of the following quarter's production needs. Some $36,000$ litres of oil will be on hand to start the first quarter of Year $2.$

Required:

Prepare a direct materials budget for oil, by quarter and in total, for Year $2.$ At the bottom of your budget, show the amounts of purchases for each quarter and for the year in total.

e

$11$C