Cowles Corporation Inc makes and sells a single product Prod

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:

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 total needs (i.e., production requirements plus desired ending inventory) of Material K for November are:

52,410 yards

40,800 yards

37,380 yards

44,940 yards

Solution

Calculate total needs of material K for november :

Total needs for material K for november = (13600*3)+(12900*3*30%) = 52410

So answer is a) 52410 yards