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21 June, 10:38

Budgeting material purchases budget. The Howell Company has prepared a sales budget of 42,000 finished units for a 3 - month period. The company has an inventory of 11,000 units of finished goods on hand at December 31 and has a target finished goods inventory of 13,000 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 an inventory of 66,000 gallons of direct materials at December 31 and has a target ending inventory of 56,000 gallons at the end of the succeeding quarter. How many gallons of direct materials should Howell Company purchase during the 3 months ending March 31?

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  1. 21 June, 10:47
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    The number of Gallon materials Howell company should buy is 166000 Gallons

    Explanation:

    Finished goods

    opening inventory 11000

    produced

    closing inventory 13000

    finished goods sold 42000

    using the bottom up approach to get goods produced

    sold goods + closing goods - opening goods = produced = 44000 goods

    Direct material (Gallons)

    opening materials 66000

    purchased 166000

    available for use 232000

    used in production 176000

    closing gallons 56000

    We use the bottom up approach to get the materials to be purchased

    closing stock plus used in production to get available for use then subtract opening material to get purchased = 166000
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