Question

The

McKnight

Company has prepared a sales budget of

48 comma 000

finished units for a​ 3-month period. The company has an inventory of

10 comma 000

units of finished goods on hand at December 31 and has a target finished goods inventory of

12 comma 000

units at the end of the succeeding quarter.

It takes

4

gallons of direct materials to make one unit of finished product. The company has inventory of

62 comma 000

gallons of direct materials at December 31 and has a target ending inventory of

56 comma 000

gallons at the end of the succeeding quarter. How many gallons of direct materials should

McKnight

Company purchase during the 3 months ending March​ 31?

Purchases to be made (in gallons)

Answer 1

Direct materials budget

Sales (units)	48,000
+ Ending inventory of Finished Goods	12,000
Total finished goods inventory needed	60,000
-Beginning inventory of Finished Goods	- 10,000
Production units	50,000
Direct materials per unit	4
Total gallons needed for production	200,000
Desired ending direct materials pounds	56,000
Total materials required	256,000
Beginning direct materials gallons	- 62,000
Direct material purchases	194,000

Purchases to be made (in gallons) = 194,000

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