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Problem - Three grams musk oil are required for each herds of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost the musk oil is $1.60 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

62,000

92,000

152,000

102,000

72,000

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 in 20% of the following quarter's production needs. Some 37,200 grams of musk oil will be on hand to start the first quarter of Year 2.

Required - Prepare a direct material budget for musk oil, by quarter and in total for Year 2.

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  • Reference No.:- M92552438
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