Balmforth Products, Inc. makes and sells a single product called a Bik. It takes

Question

Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three yards of Material A to make one Bik. Budgeted production of Biks for the next five months is as follows: February 14,000 units March 15,500 units April 11,900 units May 12,600 units June 14,500 units Balmforth wants to maintian monthly eding inventories of Material A equal to 20% of the following month's production needs. On January 31, this target had not been attained since only 2,000 yards of Material A were on hand. The cost of Material A is $0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget. Prepare a budget for the total cost of Material A to be purchased in February.

Explanation / Answer

Answer:

Material Budget for February Feb Mar Budgeted Production units 14000 15500 A Material required (yards) -3 yards/Bik 42000 46500 B Closing inventory (20% of following month req.) 9300 C Opening Inventory 2000 D Material to be purchased (yards) (A+B -C) 49300 E Cost of material to be purchased ($0.8 per yard) 39440

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