Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $2 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 Year 3

First Second Third Fourth First

Budgeted production, in calculators 69,000 99,000 159,000 109,000 89,000

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 15% of the following quarter's production needs. A total of 45,000 chips will be on hand to start the first quarter of year 2.

Required:

Draw 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.

Direct materials budget -Year 2

First quarter 2nd quarter 3rd quarter 4th quarter year

Required production in calculators ................. ............. ................. ............ ..........

No.of chips per calculator ............ ............. ....................... ................. ..........

Production need-chips ............. .......... ................ ............. ..........

.......... ........... ............ ............ .............. ..............

Total needs ............... ............. .............. ............. ...........

......... ........... .......... ............. ............... ............

Required purchases-chips .............. ........... ............. ............... ............

Total cost of purchases ........... ............ .............. ............. ............