E920A Direct materials budget (Learning Objective 2) The Ma Beckett Industries m

Question

E920A Direct materials budget (Learning Objective 2) The Ma Beckett Industries manufactures a popular interactive stuffed animal for children that re- quires two computer chips inside each toy. The company pays $3 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 25% of the fol- lowing month's production needs. The production schedule for the first four months of the year is as follows: January. February.. March Stuffed animals to be produced 5,600 4,200 4,800 4,500 . .. Requirement Prepare a direct materials budget for the first quarter that computer chips needed and the dollar amount of the purchases in the budget. shows both the number of

Explanation / Answer

Prepare direct materials budget :

January February March Quarter Production units 5600 4200 4800 14600 Material needed per unit 2 2 2 2 Material needed for production 11200 8400 9600 29200 Add: Desired ending inventory 2100 2400 2250 2250 Total needs 13300 10800 11850 31450 Less: Beginning inventory 0 (2100) (2400) 0 Purchase (unit) 13300 8700 9450 31450 Rate per unit 3 3 3 3 Material purchase cost 39900 26100 28350 94350

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