Cowles Corporation, Inc. makes and sells a single product, Product R. Three yard
ID: 2498228 • Letter: C
Question
Cowles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:
August: 13,000 Units September: 13,500 units October: 14,500 units November: 13,600 units December: 12,900 units
The company wants to maintain monthly ending inventories of Material K equal to 30% of the following month's production needs. On July 31, this requirement was not met because only 3,500 yards of Material K were on hand. The cost of Material K is $0.80 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.
The desired ending inventory of Material K for September is:
12,750 yards
12,500 yards
13,050 yards
12,150 yards
Explanation / Answer
September Inventory = October Output * Materials required per output * 30% = 14500 * 3 * 30% = 13050
Correct Choice: C