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Budgeting

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  • June 11, 2020 at 7:49 pm
    Budgeting 2
    ketki15
    Participant

    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?

    June 12, 2020 at 10:27 am
    Budgeting 3
    John Moffat
    Keymaster

    The 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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