PrestonPreston

Industries manufactures a popular interactive stuffed animal for children that requires

fourfour

computer chips inside each toy. The company pays

$ 2$2

for each computer chip. To help to guard against stockouts of the computer chip,

PrestonPreston

Industries has a policy that states that the ending inventory of computer chips should be at least

3030%

of the following month's production needs. The production schedule for the first four months of the year is as follows:

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

January. . . . .

5,500

February. . . .

4,300

March. . . . . .

4,600

April. . . . . . . .

4,800

.

Preston Industries manufactures a popular interactive stuffed animal for children that requires four computer chips inside each toy. The company pays $2 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 30% 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 Units to be produced 5,500 4,300 Multiply by: Quantity of direct materials needed per unit - 4 4 Quantity needed for production 22,000 17,200 Plus: Desired ending inventory of direct materials 5,160 5,520 Total quantity needed 27,160 22,720 Less: Beginning inventory of direct materials 22000 Quantity to purchase Multiply by: Cost per unit March 4,600 4 18,400 5,760 24,160 17200 Quarter 14,400 4 57,600 5 ,760 63,360 Total cost of direct material purchases Enter any number in the edit fields and then click check