Given the following information from Power Enterprises’ direct materials budget, how much direct materials needs to be purchased?

Beginning Materials Inventory= $101,200

Ending Materials Inventory= 105,300

Materials needed for production= 890,250

the method to get the correct answer is so simple, here it it!

First you have to look at how much of an inventory is there. this means that since you have them, you don't have to produce that amount. so you deduct that amount from this month's production requirement.

$890,250 - $101,200 =  789,050

then you must look at how many of an inventory we have to keep at the end of this month! this means our inventory level can't reach 0 and we must have this as the balance at the end of the period. so we have to add this amount to the production requirement as an excess amount!

$789,050 + $105,300 = $894,350

$894,350 is the answer!

Explanation:

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