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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 2Year 3
FirstSecondThirdFourthFirst
Budgeted production, in bottles90,000120,000180,000130,000100,000

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.

Answer & Explanation Solved by verified expert
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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