Blitzen Co is about to start work on budgets for 20X6. One kg of direct material A is required to
make four units of its product. Each unit of product also requires three kg of material B and two
hours of direct labour. Demand for the product and the supply of material A is unlimited, but
only 50,000 kg of material B and 40,000 labour hours are available in the coming period.
What is the principal budget factor for 20X6?
Direct material A
Sales demand
Direct material B
Direct labour
the answer given is material b but shouldnt it be sales?
Ask the Tutor ACCA MA
Budgeting
6y ago#1The answer is correct.
Material b is the principal budget factor because it is the amount of the material available that is limiting the level of activity.
Do please watch my free lectures on this because I explain why it is material in this situation.
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