Question

Smith Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. The company pays S3 for each computer chip. To help to guard against stockouts of the computer chip, Beckett Industries has a policy that states that the ending inventory of computer chips should be at least 2596 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............... 5,600
February............. 4,200
March................. 4,800
April.................... 4,500

Required:
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.

Answer 1

Answer:

                                SMITH INDUSTRIES

            DIRECT MATERIAL BUDGET FOR THE FIRST QUARTER

                                             JAN                  FEB                   MAR

Production                          5,600             4,200                 4,800

closing inventory               1,050               1,200                 1,125

                                            6,650               5,400               5,925

Opening inventory             (1,400)             (1,050)             (1,200)

Purchases (units)               5,250                 4,350             4,725

Purchases ($)($3 per unit) 15,750              13,050           14,175

workings

closing inventory

Dec  = 25% *5600 = 1400

Jan  = 25%* 4200 = 1050

Feb = 25%*4800 =   1200

Mar = 25%*4500 =  1125

Explanation: