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: 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.
-The total needs (i.e. ,production requirements plus desired ending inventory)of Material A for the month of May are:

Question

Quizplus · Accepted Answer

The total needs for Material A are calculated by adding the production requirements to the desired ending inventory. The correct total is 46,500 yards.