McKnight Industries manufactures a popular interactive stuffed animal for children that requires four computer chips inside each toy. The company pays $1 for each computer chip. To help to guard against stockouts of the computer chip, McKnight Industries has a policy that states that the ending inventory of computer chips should be at least 25% of the following month's production needs. The production schedule for the first four months of the year is as follows: 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. 4 Prepare the direct materials budget by first calculating the total quantity needed, then complete the budget. McKnight Industries Direct Materials Budget For the Months of January through March January February March Quarter Units to be produced 5,500 4,600 4,800 14.900 Multiply by: Quantity of direct materials needed per unit Quantity needed for production 22,000 18.400 19,200 59,600 Plus: Desired ending inventory of direct materials 4,600 4,800 4,700 4,700 Total quantity needed 26,600 23,200 23.900 64,300 Less: Beginning inventory of direct materials Quantity to purchase Multiply by: Cost per unit 1.00 $ 1.00 $ 1.00 $ 100 Total cost of direct material purchases $ Data table Stuffed animals to be produced January ..... 5,500 February .... 4,600 March 4,800 April 4,700 Print Done