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    EXERCISE 9-3 Direct Materials Budget

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    NABILAH KHANSA 1911000089
    Musk oil is required for perfume production and inventory levels must be maintained at 20% of the following quarter's needs. The budget outlines musk oil requirements and purchases for each quarter of Year 2. Total purchases for the year are projected to be 180,900 roubles.

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    EXERCISE 9-3 Direct Materials Budget

    Uploaded by

    NABILAH KHANSA 1911000089
    465 views2 pages
    Musk oil is required for perfume production and inventory levels must be maintained at 20% of the following quarter's needs. The budget outlines musk oil requirements and purchases for each quarter of Year 2. Total purchases for the year are projected to be 180,900 roubles.

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    Assignment 4

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    Musk oil is required for perfume production and inventory levels must be maintained at 20% of the following quarter's needs. The budget outlines musk oil requirements and purchases for each quarter of Year 2. Total purchases for the year are projected to be 180,900 roubles.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    465 views2 pages

    EXERCISE 9-3 Direct Materials Budget

    Uploaded by

    NABILAH KHANSA 1911000089
    Musk oil is required for perfume production and inventory levels must be maintained at 20% of the following quarter's needs. The budget outlines musk oil requirements and purchases for each quarter of Year 2. Total purchases for the year are projected to be 180,900 roubles.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    E9-3

    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:

    Mink Cares
    Direct Material Budget
    For the year ended Dec 31, 20A
     
      Year 2 Year 3
      First Second Third Fourth First
    60.00 90.00 150.00 100.00 70.00
    Required production in bottles 0 0 0 0 0
    Raw materials needed per bottle 3 3 3 3 3
              210000
      Year 2
      First Second Third Fourth Year
    Production needs 180000 270000 450000 300000 1200000

    Add desired ending inventory of raw materials 54.000 90000 60000 42000 42000
    Total needs 234000 360000 510000 342000 1242000
    Less beginning inventory of raw materials 36000 54000 90000 60000 36000
    Raw materials to be purchased 198000 306000 420000 282000 1206000
    Cost of raw materials per grams $0,15 $0,15 $0,15 $0,15 $0,15
    $29.70 $45.90 $63.00 $42.30
    Cost of raw materials to be purchased 0 0 0 0 $180.900

    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.
    E9-2

    EXERCISE 9–2 Production Budget [LO3]

    Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next
    four months as follows:

    Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next
    four months as follows:

    The company is now in the process of preparing a production budget for the second quarter. Past
    experience has shown that end-of-month inventory levels must equal 10% of the following month’s
    sales. The inventory at the end of March was 5,000 units. Required: Prepare a production budget for
    the second quarter; in your budget, show the number of units to be produced each month and for
    the quarter in total.

    SOLUTION

    Down Under Products, Ltd

    Production Budget

    For the year ended Dec 31, 20A

    April Mei June Quarter


    Budgeting sales 50.000 75.000 90.000 215.000
    Add desired ending inventory of materials 7.500 9.000 8.000 8.000
    Total needs 57.500 84.000 98.000 223.000
    Less beginning inventory of raw material 5.000 7.500 9.000 5.000
    Required production 52.500 76.500 89.000 218.000

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