Question

# Smith Industries manufactures a popular interactive stuffed animal for children that requires four computer chips inside...

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

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