Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by asmall company in western Siberia. The cost of the musk oil is 150 roubles per kilogram. (Siberia is locatedin Russia, whose currency is the rouble.) Budgeted production of Mink Caress is given below by quartersfor Year 2 and for the first quarter of Year 3:Year 2 Year 3First Second Third Fourth FirstBudgeted production, in bottles ...... 60,000 90,000 150,000 100,000 70,000Musk oil has become so popular as a perfume ingredient that it has become necessary to carry largeinventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of aquarter must be equal to 20% of the following quarter’s production needs. Some 36,000 grams of musk oilwill 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. At the bottom of yourbudget, show the amount of purchases in roubles for each quarter and for the year in total.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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.
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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