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Budgeting for Material Needs

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AAA Inc. has developed the following production budget for one of its products for the second quarter of the year:

month production
april 18,300
may 15,400
june 12,000

Each unit takes 4 pounds of material 256, which costs $3 per pound. AAA inc has 1600 pounds of material 256 on hand March 30 and wants an ending inventory of material 256 at 5 percent of next month's production requirements. Production in July is expected to be 12,000 units. How much material 256 needs to be purchased in May and at what cost?

A. 62,280 lbs for $186,840
B. 60,920 lbs for $182,760
C. 64,000 lbs for $192,000
D. 61,600 lbs for $184,800

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Solution Summary

This solution illustrates how to determine how much material will be needed for coming production needs.

Solution Preview

The expected production for May is 15,400 units, but 770 units will be on hand from April. Further, they will need to have 600 units on hand ...

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