Answer:
Purchases= 123,000 gallons
Explanation:
Giving the following information:
Sales:
40,000 finished units for 3 months.
Finished goods inventory:
Beginning inventory= 11,000 units
Desired ending inventory= 13,000 units
It takes 3 gallons of direct materials to make one unit of finished product.
Direct material inventory:
Beginning inventory= 61,000 gallons
Desired ending invenyory= 58,000 gallons
<u>First, we need to calculate the production for the period:</u>
Production= sales + desired ending inventory - beginning inventory
Production= 40,000 + 13,000 - 11,000
Production= 42,000 units
<u>Now, we can calculate the purchases:</u>
Purchases= production + desired ending inventory - beginning inventory
Purchases= 42,000*3 + 58,000 - 61,000
Purchases= 123,000 gallons
