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Question(s) / Instruction(s):

Zeta Co. makes and sells T-shirts. It takes three meters of Material A to make one T-shirt. Budgeted production for the next three months is as follows:

August                  14,000 units

September         15,500 units

October               11,900 units

The company wants to maintain monthly ending inventories of Material A equal to 20% of the following month’s production needs. On July 31, 2,000 meters of Material A were on hand. The cost of Material A is $0.80 per meter. The company wishes to prepare a direct materials budget for the last quarter.

What is the total cost of Material A that should be purchased in August?

a.            $34,320

b.            $39,440

c.             $42,900

d.            $49,300

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