Kyler Industries manufactures a popular interactive stuffed animal for children that requires three computer chips inside each toy. The company pays $1 for each computer chip. To help to guard against stockouts of the computer chip, Kyler 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. . . . .	5,100
February. . . .	4,800
March. . . . . .	4,900
April. . . . . . . .	4,500

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.

Kyler 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