Reference no: EM131809109

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.