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Prepare a direct materials budget for musk oil

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Reference no: EM131137791

Two 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. Budget 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

Budget production, in bottles

84,000

114,000

174,000

124,000

94,000

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 quarter's production needs. Some 33,600 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.

Reference no: EM131137791

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