Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. At the bottom of your budget, show the amount of purchases in roubles for each quarter and for the year in total.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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EXERCISE 9–3 Direct Materials Budget [LO4]
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 150 roubles per kilogram.
(Siberia is located in Russia, whose currency is the rouble.) 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.
398
Chapter 9
Required:
Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. At the bottom of
your budget, show the amount of purchases in roubles for each quarter and for the year in total.
Transcribed Image Text:EXERCISE 9–3 Direct Materials Budget [LO4] 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 150 roubles per kilogram. (Siberia is located in Russia, whose currency is the rouble.) 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. 398 Chapter 9 Required: Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. At the bottom of your budget, show the amount of purchases in roubles for each quarter and for the year in total.
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