Question # 3 Production and Direct Materials Budgets Walsh Company has budgeted the following unit sales for the first quarter of 2017: Units January 36,000 February 54,000 March 45,000 It takes two pounds of direct materials, which cost $6 per pound, to manufacture one unit of product. It is the company's policy to have a finished goods inventory on hand at the end of each month equal to 20% of next month's sales and to maintain a direct materials inventory at the end of the month equal to 30% of the next month's production needs. The inventory levels at December 31, 2016, were in accordance with company policy. Instructions: Answer the following independent questions and show computations which support your answers. 1. What was the number of units in ending finished goods inventory at December 31, 2016? 2. Calculate the number of units that should be scheduled for production in the month of February. 3. What was the number of units in ending direct materials inventory at December 31, 2016? 4. What was the number of units and the dollar amount of direct materials purchases budgeted for the month of January?

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