Gatter Company expects to begin the coming yeare with 6000 ceramic pots in finished goods inventory. It expects to sell 85,000 pots and end the year with 8000 pots in finished goods inventory. Four pounds of clay go into each ceramic pot. The company expects to have 4000 pounds of clay on hand at the beginning of the coming year and wished to end the year with 6000 pounds in inventory.
1) Prepare a production budget showing the number of ceramic pots that the company must manufacture to carry out this plan.
2) Prepare a direct materials purchases budget showing the number of pounds of clay the company must purchase during the year.
3) What is the amount of money needed for clay purchases if the purchase price is $2 per pound?