13ne value 110 polnts Inc., has developed a very powerful electronic calculator.

Question

13ne value 110 polnts Inc., has developed a very powerful electronic calculator. Each calculator requires three ach and are purchased from an overseas supplier. Micro Products has prepared small 'chips that cost $3 a production budget for the calculator by quarters for Year 2 and for the first quarter of Year 3, as shown below First 55,000 84,000 160,000 106.000 Year 2 cond Third Fourth Year 3 First 71.000 Budgeted production, in calculators The chip used in production of the calculator is sometimes hard to get, so it is necessary to carry large inventories as a precaution against stockouts. For this reason, the inventory of chips at the end of a quarter must equal 20% of the following quarter's production needs. A total of 33,000 chips will be on hand to start the first quarter of Year 2. Requirec Prepare a direct materials budget for chips, by quarter and in total, for Year 2. (Do not round intermediate calculations.) Micro Products, Inc Direct Materials Budget- Year 2 Quarter First Second Third Fourth Year Required production in calculators Number of chips per calculator Production needs-chips Total needs Required purchases--chips Total cost of purchases

Explanation / Answer

Micro Products,Inc. Direct Materials Budget-Year 2 Quarter First Second Third Fourth Year Required production in calculators 55,000 84,000 1,60,000 1,06,000 4,05,000 Number of chips per calculator 3 3 3 3 3 Production needs-chips 1,65,000 2,52,000 4,80,000 3,18,000 12,15,000 Ending Inventory of chips 50,400 96,000 63,600 42,600 Total needs 2,15,400 3,48,000 5,43,600 3,60,600 beginning Inventory of chips 33,000 50,400 96,000 63,600 Required Purchases-Chips 1,82,400 2,97,600 4,47,600 2,97,000 12,24,600 Total Costs of Purchases $ 5,47,200 $ 8,92,800 $ 13,42,800 $ 8,91,000 $ 36,73,800 Working: a. Quarter First Second Third Fourth Next Quarters production               84,000              1,60,000 1,06,000      71,000 Number of chips per calculator                          3                            3                 3                 3 Production needs-chips           2,52,000              4,80,000 3,18,000 2,13,000 Ending inventory @ 20% of production needs of next qarter               50,400                  96,000      63,600      42,600 b. Required Purchases-Chips           1,82,400           2,97,600           4,47,600              2,97,000 Costs per chip $                     3 $                     3 $                     3 $                        3 Total Costs of Purchases $       5,47,200 $       8,92,800 $     13,42,800 $          8,91,000

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