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Budgeting

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Budgeting

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 11, 2020 at 7:49 pm #573534
    ketki15
    Member
    • Topics: 60
    • Replies: 15
    • ☆☆

    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 #573568
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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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