Preston Industries manufactures a popular interactive stuffed animal for children that requires three computer chips inside each toy. The company pays $4 for each computer chip. To help to guard against stockouts of the computer chip, Preston 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 Prepare the direct materials budget by first calculating the total quantity needed, then complete the budget. Preston Industries Direct Materials Budget For the Months of January through March January February March Quarter Units to be produced 5,900 4,300 4,800 15,000 Multiply by Quantity of direct materials needed per unit 3 3 3 3 Quantity needed for production 17,700 12,900 14.400 45,000 3,225 3,600 3,150 3,150 Plus: Desired ending inventory of direct materials Total quantity needed 20,925 16.500 17,550 48,150 4,425 3,225 3,600 Less: Beginning inventory of direct materials Quantity to purchase 16,500 13,275 13,950 $ 4.00 $ 4.00 S 4.00 S 4.00 Multiply by: Cost per unit $ 66,000 $ 53,100 $ 55,800 Total cost of direct material purchases 13