Three ounces of zinc oxide are required for each bottle of Hawaiian Gold, a suntan...
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Accounting
Three ounces of zinc oxide are required for each bottle of Hawaiian Gold, a suntan lotion made in Orange, California. The zinc oxide cost is $1.70 per ounce. Budgeted production of Hawaiian Gold 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
64,000
94,000
154,000
104,000
74,000
There is a high demand for zinc oxide which requires the company to have large inventories of the ingredient in case of a shortage. For this reason, the zinc oxide inventory at the end of a quarter must be equal to 20% of the following quarters production needs. Some 38,400 ounces of zinc oxide will be on hand to start the first quarter of Year 2.
Required:
Prepare a direct materials budget for zinc oxide, by quarter and in total, for Year 2.
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