Austen Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. The company pays $1 for each computer chip. To help to guard against stockouts of the computer chip, Austen 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:

Austen Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. The company pays $1 for each computer chip. To help to guard against stockouts of the computer chip, Austen 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: 6 (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. Austen Industries Direct Materials Budget For the Months of January through March January February March Quarter Units to be produced 5,400 4,300 4,500 14,200 2 2 Multiply by: Quantity of direct materials needed per unit Quantity needed for production 10,800 8,600 9,000 28,400 1,720 Plus: Desired ending inventory of direct materials 1,800 1,760 1,760 Total quantity needed 12,520 10,400 10,760 30,160 Less: Beginning inventory of direct materials Quantity to purchase Multiply by: Cost per unit Total cost of direct material purchases