1. 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 $2.20 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
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 30% of the following quarter
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 $2.20 per gram.
Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first
quarter of Year 3:
Solution
Statement of Quarterly Musk oil Budget for Year 2 Quarter-1 Quarter-2 Quarter-3 Quarter-4
Total Budgeted No of Bottle of Production 100,000.00 130,000.00 190,000.00
140,000.00 560,000.00 Issue to Production @4gram per bottol 400,000.00
520,000.00 760,000.00 560,000.00 2,240,000.00 Ending Musk oil Inventory 30% of
next months production requirements 156,000.00 228,000.00 168,000.00
132,000.00 132,000.00 Total Avail Musk oil for production 556,000.00 748,000.00
928,000.00 692,000.00 2,372,000.00 Less: Beginning Musk oil inventory
80,000.00 156,000.00 228,000.00 168,000.00 80,000.00 Budgeted Purchase
of Mask oil (in gram) 476,000.00 592,000.00 700,000.00 524,000.00
2,292,000.00 Budgeted Purchase of Mask oil @$2.2 per gram $1,047,200.00 $1,302,400.00
$1,540,000.00 $1,152,800.00 $5,042,400.00