Smith 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, Smith Industries has a policy that states that the ending inventory of computer chips should be at least 20% of the following month's production needs. The production schedule for the first four months of the year is as follows:

	Stuffed animals to be produced
January. . . . .	5,500
February. . . .	4,200
March. . . . . .	4,500
April. . . . . . . .	4,000

Prepare the direct materials budget by first calculating the total quantity needed, then complete the budget.

Smith Industries
Direct Materials Budget
For the Months of January through March
	January	February	March	Quarter
Units to be produced	5,500	4,200	4,500	14,200
Multiply by: Quantity of direct materials needed per unit	4	4	4	4
Quantity needed for production	22,000	16,800	18,000	56,800
Plus: Desired ending inventory of direct materials	3,360	3,600	3,200	3,200
Total quantity needed	25,360	20,400	21,200	60,000

Less: Beginning inventory of direct materials
Quantity to purchase
Multiply by: Cost per unit
Total cost of direct material purchases