Question

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 $1.80 per gram. budgeted production of mink caress is given below by quarters for year 2 and for the first quarter of year 3:

Answer 1

Answer:

Cost of raw material to be purchased  for the four quarters of Year 2 is:

Quarter 1: $720,000

Quarter 2: $979,200

Quarter 3: $1,252,800

Quarter 4: $921,600

Total year: $3,873,600

Explanation:

Key explanations:

Units of raw material needed to meet production (A*B)  =

Required production in units of finished goods (A) × Units of raw material needed per unit of finished goods (B)

So, for example for year 1: 94,000 × 4 = 376,000, same goes for other quarters.

Total raw material units needed are achieved by adding the ending inventory to units of raw material needed to meet production.

Ending inventory = 20% of the following quarter,

therefore, ending inventory for Quarter 1 = 496,000 × 20% = 99,200

Similarly, ending inventory of 1 quarter is the opening inventory of the other quarter, therefore, 99,200 ending inventory of quarter 1, is the opening inventory of quarter 2.