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 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. . . . . . . . . . .5,900

February. . . . . . . . . . .4,000

March. . . . . . . . . . .4,700

April. . . . . . . . . . .4,600

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