Assume 100,000 units of an input currently costing $2.00 per unit are required to produce the forecasted output and a 10% price increase is expected in the sixth month of the budget year. How much should be budgeted for input for the next fiscal year?

Question

Quizplus · Accepted Answer

The cost for the first 5 months is 100,000 units * $2.00 = $200,000. For the remaining 7 months, the cost is 100,000 units * $2.20 (10% increase) = $220,000. The total budgeted cost is ($200,000 * 5/12) + ($220,000 * 7/12) = $210,000.

Assume 100,000 Units of an Input Currently Costing $2