9#3

Johnson

Industries manufactures a popular interactive stuffed animal for children that requires

four

computer chips inside each toy. The company pays

$3

for each computer chip. To help to guard against stockouts of the computer chip,

Johnson

Industries has a policy that states that the ending inventory of computer chips should be at least

20%

of the following month's production needs. The production schedule for the first four months of the year is as follows:

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(Click the icon to view the production schedule.)

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.

Prepare the direct materials budget by first calculating the total quantity needed, then complete the budget.

Johnson Industries
Direct Materials Budget
For the Months of January through March
	January	February	March	Quarter
Units to be produced
Multiply by: Quantity of direct materials needed per unit
Quantity needed for production
Plus: Desired ending inventory of direct materials
Total quantity needed

Less: Beginning inventory of direct materials
Quantity to purchase
Multiply by: Cost per unit
Total cost of direct material purchases

Data table

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	Stuffed animals to be produced
January. . . . .	5,600
February. . . .	4,300
March. . . . .	4,000
April. . . . . . .	4,800