The Mahoney Company has prepared a sales budget of 42,000 finished units for a three-month period. The company has an inventory of 22,000 units of finished goods on hand at December 31 and has a target finished good inventory of 24,000 units at the end of the succeeding quarter.
It takes 3 gallons of direct materials to make one unit of finished product. The company has an inventory of 90,000 gallons of direct materials at December 31, and has a target-ending inventory of 110,000 gallons at the end of the succeeding quarter. Each gallon costs $2 to purchase. All inventory is also carried at $2 per gallon.
Determine how many gallons of direct materials should be purchased during the three months ending March 31 and the cost of these gallons.