Question 2 (12 marks)

Marsden makes contact tracing tracking devices and has the following sales budget for the first six months of the year.

January	40,000 units
February	55,000 units
March	60,000 units
April	50,000 units
May	45,000 units
June	40,000 units

The inventory of finished goods at the end of each month is budgeted to be 15% of the next month's sales. Due to unexpected sales activity in the prior year, at the beginning of January the finished goods inventory totaled only 4,500 units. Each tracking device requires 2 specialized computer chips. Since the supply of the specialized chips is inconsistent, the company keeps an inventory of the specialized chips at the end of each month equal to 45% of the next month's production needs. On January 1 Marsden had 40,000 of the specialized chips in inventory. The chips are stored in a secure storage locker that can hold 250,000 chips.

Required:

1. Prepare a budget showing the quantity of specialized computer chips to be purchased for the first quarter of the year.
2. The purchasing manager may be able to secure a volume discount by purchasing 500,000 chips per order. What impacts (positive and negative) would there be for the company if they decide to purchase 500,000 chips per order?