Problem - 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 14,500 units
March 11,900 units
April 14,000 units
May 15,500 units
June 12,600 units
The company wants to maintain monthly ending 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.
1. The total cost of Material A to be purchased in February is:
A) $49,792
B) $47,492
C) $44,032
D) $38,912
2. The desired ending inventory of Material A for the month of March is:
A) 9,300 yards.
B) 7,140 yards.
C) 3,100 yards.
D) 8,400 yards.
3. The total needs (i.e., production requirements plus desired ending inventory) of Material A for the month of May are:
A) 46,500 yards.
B) 54,060 yards.
C) 55,200 yards.
D) 47,640 yards.