Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $3 each and are purchased from an overseas supplier. Micro Products has prepared a production budget for the calculator by quarters for year 2 and for the first quarter of year 3, as shown below: Year 2 Second Third Fourth 108,000 168,000 118,000 Year 3 First First Budgeted production, in calculators 78,000 98,000 The chip used in production of the calculator is sometimes hard to get, so it is necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of chips at the end of a quarter must be equal to 20% of the following quarter's production needs. A total of 54,000 chips will be on hand to start the first quarter of year 2 Required: Prepare a direct materials purchases budget for chips, by quarter and in total, for year 2. At the bottom of your budget, show the dollar amount of purchases for each quarter and for the year in total. Micro Products, Inc. Direct Materials Budget - Year 2 Quarter First Second Third 78,000 108,000 168,000 Fourth Year 118,000 472,000 3 3 3 3 234,000 324,000 504,000 354,000 1,416,000 Required production in calculators Number of chips per calculator Production needs--chips Add: Ending inventory Total needs Deduct: Beginning inventory Required purchases---chips Total cost of purchases 234,000 324,000 504,000 354,000 1,416,000