AT Co makes a single product and is preparing its material usage budget for next year Each unit of product requires 2kg of material, and 5,000 units of product are to be produced next year Opening inventory of material is budgeted to be 800 kg and AT co budgets to increase material inventory at the end of next year by 20%. The material usage budget for next year is

[amp_mcq option1=”8,000 Kg” option2=”9,840 kg” option3=”10,000 Kg” option4=”10,160 Kg” correct=”option2″]

The correct answer is B. 9,840 kg.

The material usage budget is calculated as follows:

Material usage budget = Production quantity x Material per unit x (1 + Closing inventory/Opening inventory)

= 5,000 units x 2 kg/unit x (1 + 120/100)

= 9,840 kg

The other options are incorrect because they do not take into account the closing inventory.