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Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $4 each and are purchased from an

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Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $4 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 94,000 154,000 First 64,000 Budgeted production, in calculators Year 3 First 84,000 Fourth 104,000 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 40,000 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 Fourth Year Required production in calculators Number of chips per calculator Production needschips Total needs Required purchaseschips Total cost of purchases

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