ACCA Applied Knowledge · Management Accounting · Budget preparation
Quill Co makes 6,000 units of a product, each needing 5 kg of material at $4 per kg. Opening material inventory is 3,000 kg. Closing inventory is to be 20% of the next period's usage, which is forecast at 36,000 kg. The company also expects to pay a 5% bulk discount on all purchases. What is the purchases budget in $ after discount?
Purchases are 34,200 kg, costing $136,800 before discount and $129,960 after the 5% discount. This amount is not among the listed options.
- A$142,500
- B$148,200Correct
- C$150,000
- D$156,000
Explanation
Usage is 6,000 x 5 = 30,000 kg. Closing inventory is 20% x 36,000 = 7,200 kg. Purchases = 30,000 + 7,200 - 3,000 = 34,200 kg. At $4 = $136,800, less 5% = $129,960. This is not among the options.
Did you get it right without looking?
One question tells you little. A timed set on Budget preparation shows your real accuracy, how long you take and where you lose marks.
More Budget preparation questions
- Zeta Co plans to produce 4,000 units of Product K next month. Each unit needs 3 kg of material, and 10% of the material input is lost as nor…
- Kestrel Co makes three products with the following data per unit: Product A contribution $24, uses 4 labour hours; Product B contribution $2…
- A company budgets sales of 12,000 units for next period. Opening inventory of finished goods is 1,500 units and the closing inventory target…
- Which statement about a principal budget factor is correct?
- Zeta Co plans to produce 4,500 units of a product next month. Each unit needs 2.5 standard labour hours. Employees are paid $12 per hour. Wh…
- Brook Co budgets to make 6,000 units. Each unit requires 3 standard hours of direct labour. Workers are expected to be idle for 10% of the h…