Four grams of musk oil are required for each bottle of Mink Caress, a very...
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Accounting
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 $2.10 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
98,000
128,000
188,000
138,000
108,000
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 78,400 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.
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