Orr Company makes and sells a single product called a Bik. It takes three yards of Material A to Make one bike. Budgeted production of Biks for the next three months is as follows:
Budgeted Biks to be Produced
February 14,000 units
March 15,500 units
April 11,000 units
The company wants to maintain monthly ending inventories of Material A that are equal to 20% of the following month's production needs. The cost of Material A is $0.80 per yard. The company is in the process of preparing a direct materials purchases budget.
1. Calculate the total cost of Material A to be purchased in February. Do not use decimals in your answer.
2. Assume Orr Company pays for 40% of a month's purchase of direct materials in the month of purchase and the other 60% is paid in the following month. Calculate the amount of budgeted accounts payable at April 30. Do not use decimals in your answer.