The Raw Materials Inventory account must be considered when calculating the amount of direct materials to be purchased.

Question

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The Raw Materials Inventory account reflects the current amount of direct materials that a company has on hand. In order to determine how much direct materials need to be purchased, the amount in the Raw Materials Inventory account must be considered. This is because the goal is to maintain enough inventory to meet production needs, but not so much that excess materials tie up cash flow or storage space. By monitoring the Raw Materials Inventory account, companies can determine when to reorder materials and how much to order based on their current inventory levels.

The Raw Materials Inventory Account Must Be Considered When Calculating