Dante Ltd prepares annual budgets. The following beginning and ending inventory levels (in units) are planned for next year. Four kilograms of direct material are required to produce each unit of finished product.
I January 31 December
Direct Material 80,000 100,000
Work in Progress 20,000 20,000
Finished Goods 160,000 100,000
Required:
1) If Dante plans to sell 480,000 units during the year, calculate the number of units the firm would have to manufacture.
2) If 600,000 finished units are to be manufactured by Dante during the year, determine the amount of direct material that needs to be purchased.