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Texas Products has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $2.00 each and are purchased from an overseas supplier. Texas Products has prepared a production budget for the calculator by quarters for Year 2 and for the first quarter of Year 3, as follows:
Year 2
Year 3
First
Second
Third
Fourth
Budgeted productions,
in Calculators
60,000
90,000
150,000
100,000
80,000
The inventory of the chips at the end of a quarter must be equal to 20% of the following quarter's production needs. There will be 36,000 chips on hand to start the first quarter of Year 2.
Required:
Prepare direct materials budget for the chips, by quarter and in total, for Year 2 including the dollar amount of purchases for each quarter and for the year in total.
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