Two Yards of a Fabric Are Required for Each Blouse

question 19

Essay

Two yards of a fabric are required for each blouse produced by Northern Shirt Corporation.The cost of the fabric is $4 per yard.Budgeted production of blouses is given below for the fourth quarter and the first month of the following quarter. To prevent against stock outs of the fabric,the company maintains an ending inventory each month equal to 10% of the next month's production needs.The beginning inventory of the fabric in October will be 3,600 yards.
Required:
Prepare a direct materials budget for the fabric,by month and in total for the fourth quarter.Be sure to include both the quantity to be purchased and its cost for each month.

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Definitions:

Demand

The amount of a product or service that buyers are ready and capable of buying at different price levels over a specific time frame.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of that good that suppliers are willing to produce and sell.

Price Elasticity

A measure indicating the extent to which the demand for a merchandise changes following a price adjustment.

Short Run

A period in economics during which at least one input is fixed and cannot be changed by the firm.