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Prepare direct materials budget for musk oil

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Reference no: EM132524277

Three 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 $1.50 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

                                60,000       90,000       150,000         100,000        70,000

  • 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 36,000 grams of musk oil will be on hand to start the first quarter of Year 2.

Required:

Question 1: direct materials budget for musk oil, by quarter and in total, for Year 2.

Reference no: EM132524277

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