Four grams of musk oil are required for each bottle of Mink Caress, a very popular...

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Accounting

Four grams of musk oil are required for each bottle of MinkCaress, a very popular perfume made by a small company in westernSiberia. The cost of the musk oil is $1.60 per gram. Budgetedproduction of Mink Caress is given below by quarters for Year 2 andfor the first quarter of Year 3:
Year 2 Year 3
First Second Third Fourth First
Budgeted production, in bottles 90,000 120,000 180,000 130,000 100,000
Musk oil has become so popular as a perfume ingredient that ithas become necessary to carry large inventories as a precautionagainst stock-outs. For this reason, the inventory of musk oil atthe end of a quarter must be equal to 20% of the followingquarter’s production needs. Some 72,000 grams of musk oil will beon hand to start the first quarter of Year 2.
Required:
Prepare a direct materials budget for musk oil, by quarter andin total, for Year 2.

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3.8 Ratings (359 Votes)

Solution Mink Caress Direct Materials Budget Quarter First Second Third Forth Year Required Production in Units of Finished Goods 90000 120000 180000 See Answer

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	Year 2				Year 3
	First	Second	Third	Fourth	First
Budgeted production, in bottles	90,000	120,000	180,000	130,000	100,000