Question

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

Answer 1