Gable Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. Gable Industries pays $3 for each computer chip. To help guard against stockouts of the computer chip, Gable Industries has a policy that states that the ending inventory of computer chips should be at least 30% of the following month’s production needs. The production schedule for the first four months of the year is as follows:
Stuffed animals to be produced
January .................................................................................... 5,700
February................................................................................... 4,600
March...................................................................................... 4,300
April......................................................................................... 4,900
Requirement
Prepare a direct materials budget for the first quarter that shows both the number of computer chips needed and the dollar amount of the purchases in the budget.